A 23-fold surge in net profit for a chemical fiber enterprise in the first half of 2026 is no mere cyclical story. Hengyi Petrochemical's semi-annual performance forecast shows a net profit attributable to shareholders of CNY 5.5 to 6 billion, a year-on-year increase of 2,326% to 2,547%. In an industry where margins are generally squeezed, this figure forces the entire textile chain to reassess the strategic value of 'integrated refining and chemical fiber.'
The Logic Behind the Profit Explosion
Hengyi's performance surge is not accidental. In Q1, the company achieved a net profit of CNY 1.995 billion, with a year-on-year increase of over 3,700%, laying a solid foundation for the year. In Q2, the tight supply-demand balance in Southeast Asian refined oil markets directly released the profit elasticity of the Brunei refinery project—net profit grew 76% to 101% quarter-on-quarter, reaching CNY 3.5 to 4 billion.
The core driver is locational advantage. Hengyi is the only domestic leading chemical fiber company with an overseas refinery. The Brunei facility benefits from tax incentives, market-based pricing, and low freight and insurance costs. Southeast Asia faces a long-term shortage of refined oil products, and spreads widened significantly in early 2026, making refining profits far higher than in China. Meanwhile, chemical products such as PX and benzene maintained high margins, and the Brunei project achieved full production and full sales, with per-ton profits remaining strong.
This reflects a shift in industry logic: when domestic PTA and polyester capacity is oversupplied and processing fees are compressed, companies with overseas refining assets gain a profit source independent of the domestic cycle. For the textile chain, this means pricing power and stability of upstream raw materials are concentrating among players with scarce locational advantages.
Three Major Projects Reshape Industry Structure
Alongside profit growth, Hengyi is accelerating three strategic construction projects that will fundamentally change its business structure and have far-reaching impacts on the chemical fiber industry.
The second phase of the Brunei refinery has been fully launched, with a designed capacity of 12 million tons per year, mainly producing diesel, PX, and benzene. It is scheduled for completion by the end of 2028, bringing total Brunei capacity to 20 million tons per year. This is the only overseas capacity addition among private large-scale refineries in recent years, with clear strategic scarcity.
The Xinjiang coal-to-ethylene glycol project plans to produce 2.4 million tons per year of high-quality fiber-grade MEG, expected to start production in the first half of 2028. This directly targets another key polyester raw material. Currently, China still relies heavily on imported MEG, and a successful coal-based route could significantly enhance raw material self-sufficiency.
More imaginative is the Hubei Jingzhou recycling new materials project, which plans a 300,000-ton-per-year demonstration facility using waste textiles instead of crude oil as feedstock, with an 18-month construction period. This aligns with China's 'dual carbon' policy and waste textile recycling directives. Upon completion, Hengyi will form an 'oil-coal-textile' parallel raw material structure, reducing dependence on crude oil and enhancing profit stability across the chain.
Sustainability and Risks: A Dual Perspective
The market is naturally questioning whether the 23-fold profit growth is sustainable. From an industry logic perspective, the tight supply-demand balance in Southeast Asian refined oil is unlikely to reverse quickly, so high profitability at the Brunei refinery may last through the year. The PTA and polyester sectors have seen substantive capacity optimization, offering sustained margin recovery, and the nylon project will also contribute incrementally.
- A major volatility risk is international crude oil prices. A sharp drop could trigger inventory write-downs and narrow crack spreads, directly impacting refining profits.
- The Brunei Phase II and Xinjiang MEG projects involve large investments and long construction periods, posing risks of delays and capital strain.
- Over-concentration of core refining capacity in a single region (Brunei) exposes the company to host-country policy and geopolitical changes that could affect cost advantages and supply stability.
- If downstream textile demand disappoints, the pace of polyester margin recovery will slow.
Overall, Hengyi's 23-fold profit growth in H1 is no cyclical pulse but a concentrated release of years of global layout. Short-term industry upcycle plus capacity release make high earnings highly probable; long-term, as the three projects materialize, the company will transform from a 'refining and chemical fiber leader' to an 'oil-coal-textile integrated new materials enterprise.' For the textile industry, this means upstream raw material supply is undergoing structural change, and competitiveness will depend not just on scale but on control over scarce resources and raw material diversification.