A private petrochemical giant's semi-annual report preview has forced the entire upstream textile chain to reassess its profit ceiling. On the evening of June 25, Hengyi Petrochemical released its H1 2026 performance forecast, showing net profit attributable to shareholders of listed companies expected to reach RMB 5.5-6 billion, a year-on-year increase of 2,326% to 2,547%. This figure is not merely a product of the industry cycle but the result of three superimposed factors: strategic layout, capacity reduction, and geographic arbitrage.
Three Engines of Profit Explosion
Hengyi's Q1 net profit reached RMB 1.995 billion, up 3,774% YoY, with non-recurring profit growth even more dramatic at 23,640%. But what truly caught the market's attention was the Q2 sequential growth of 76% to 101%, with quarterly profit ranging from RMB 3.5 billion to 4 billion. The core driver is the Brunei refinery's full-capacity, full-sales operation. Southeast Asia's refined oil market remains structurally tight, with crack spreads widening, while the Brunei plant enjoys tax incentives, market-based pricing, and low freight premiums, giving it per-ton margins far higher than domestic peers.
Meanwhile, the domestic PTA and polyester industry's 'anti-involution' is making substantive progress. The vicious price competition caused by overcapacity over the past two years has turned a corner in 2026—some outdated capacity has exited, operating rates have become more rational, and polyester profitability is recovering sustainably. This means Hengyi's profit growth is not an isolated refining dividend but a synchronized improvement across the entire chain from raw materials to intermediates to fibers.
Notably, the ramp-up of nylon capacity also contributed. As one of the few Chinese chemical fiber companies with both polyester and nylon lines, Hengyi's differentiated fiber segment is beginning to deliver profits, further diversifying its reliance on any single category.
Three Projects: From Refining Leader to 'Oil-Coal-Textile' Integration
Beyond high profits, Hengyi's three strategic projects under construction deserve close attention from the textile industry. The Brunei Phase II refinery has fully launched, with optimized design capacity of 12 million tons/year, producing diesel, PX, benzene, and other high-value products, targeting completion by end-2028. Total Brunei capacity will then reach 20 million tons/year, making it the only overseas capacity addition among private mega-refineries in recent years, with extremely high strategic scarcity.
The Xinjiang coal-to-ethylene glycol project plans to produce 2.4 million tons/year of high-quality fiber-grade ethylene glycol, expected to begin operations in H1 2028. This directly addresses China's heavy reliance on imported ethylene glycol, using coal-based chemistry to replace oil-based feedstocks, resulting in a more resilient cost structure.
Even more forward-looking is the Hubei Jingzhou recycled materials project, a 300,000-ton/year waste textile recycling demonstration facility with a construction period of just 18 months. This directly aligns with China's 'dual carbon' strategy and waste textile recycling policies. Upon completion, Hengyi will have a three-pronged raw material structure—oil, coal, and textiles—completely breaking its dependence on single-source crude oil and enhancing the stability of the entire chain's profits.
Can High Prosperity Last? Risks and Resilience
The market's key question is whether the 23-fold profit growth is a pulse or a new normal. Fundamentally, the tight supply-demand in Southeast Asian refined oil is unlikely to reverse quickly, and Brunei's high profitability should persist for the year. PTA and polyester capacity optimization is deepening, making profit recovery sustainable. However, risks are not negligible: international crude oil price volatility could trigger inventory write-downs and margin compression; the large-scale, long-cycle Brunei Phase II and coal-to-ethylene glycol projects face risks of delays or funding strain; and the concentration of core capacity in a single Brunei location exposes operations to host-country policy and geopolitical shifts.
For downstream textile companies, Hengyi's profit surge sends a dual signal: first, improved upstream profitability means PX, PTA, and other product prices may gain stronger support, potentially raising fabric procurement costs; second, Hengyi's transition to 'oil-coal-textile' integration should, in the long run, help smooth raw material price fluctuations and provide more stable supply assurance downstream.