In the first half of 2026, Hengyi Petrochemical, a leading Chinese chemical fiber company, reported a staggering net profit of RMB 5.5 to 6 billion, a year-on-year increase of over 23 times. This record-breaking performance stands out in the context of a generally pressured chemical fiber industry.
Core Driver: Brunei Refining
Hengyi's profit surge is no accident. In Q1, net profit reached RMB 1.995 billion, up over 37 times year-on-year. In Q2, tight supply-demand dynamics in Southeast Asian refined oil markets further boosted the Brunei refining project's profitability, with quarterly net profit rising 76% to 101% sequentially.
The Brunei refinery is Hengyi's key differentiator. As the only Chinese chemical fiber company with an overseas refinery, Hengyi benefits from chronic supply shortages in Southeast Asia. Compared to domestic peers, the Brunei project enjoys tax incentives, market-based pricing, and lower freight costs, achieving full-capacity production and sales with high per-ton margins.
Strategically, the Brunei refinery not only generates profits from refined oil but also supplies PX and benzene to Hengyi's PTA and polyester operations. While the domestic PTA and polyester sectors grapple with overcapacity, Hengyi's upstream cost advantage provides a buffer for downstream margin recovery.
Three Strategic Projects: From Refining to Integrated 'Oil, Coal, and Fabric'
Alongside profit growth, Hengyi is accelerating three strategic projects that will shape its next five years.
The Brunei Phase II expansion is fully underway, with optimized capacity of 12 million tons per year, targeting diesel, PX, and benzene. Scheduled for completion by end-2028, it will bring total Brunei capacity to 20 million tons annually, making it the only overseas capacity addition among private Chinese mega-refiners.
The Xinjiang coal-to-ethylene glycol project plans 2.4 million tons of high-quality fiber-grade MEG annually, expected online by H1 2028. This reduces reliance on oil-based feedstocks, offering greater supply stability for downstream weavers.
The Hubei recycling project will produce 300,000 tons of recycled materials annually from waste textiles, with an 18-month construction timeline. Aligned with China's 'dual carbon' goals, it will create a unique 'oil, coal, and fabric' integration.
Sustainability: Opportunities and Risks
Can Hengyi's high profitability last? The tight supply-demand balance in Southeast Asian refined oil is unlikely to reverse soon, supporting Brunei's margins for the year. Meanwhile, PTA and polyester capacity optimization is yielding sustainable margin improvements.
Key risks include:
- Volatile crude oil prices could cause inventory losses and narrow crack spreads.
- Large-scale projects face potential delays or funding pressures.
- Concentration of refining assets in Brunei exposes Hengyi to policy or geopolitical shifts.
- Weak downstream textile demand could slow polyester margin recovery.