In the first half of 2026, the Chinese chemical fiber industry witnessed a striking figure: Hengyi Petrochemical is expected to report a net profit attributable to shareholders of between 5.5 billion and 6 billion yuan, a year-on-year increase of 2,326% to 2,547%. This is not a broad industry recovery but a concentrated release of value from a specific company leveraging its overseas assets and industrial chain depth during a favorable cycle window.
Brunei Project as the Main Profit Engine
The core driver of Hengyi's profit surge is its Brunei refinery project. According to company announcements, Q1 net profit reached 1.995 billion yuan, and Q2 grew 76% to 101% sequentially, with single-quarter profit reaching 3.5 billion to 4 billion yuan. This growth is a direct result of persistently tight supply-demand dynamics in the Southeast Asian refined oil market.
Industry data shows a long-standing supply gap for refined oil in Southeast Asia, with cracking spreads widening significantly in Q1 2026. Hengyi's Brunei refinery benefits from local tax incentives, market-based pricing, and lower freight and insurance costs, achieving full production and sales with high per-ton profitability. For Chinese chemical fiber companies, this is the only overseas refinery capacity, making it strategically scarce amid domestic overcapacity.
Notably, the PTA and polyester sectors are entering an 'anti-internal competition' phase after years of capacity expansion, with gradually improving supply-demand dynamics. Nylon chain capacity release also contributed to Hengyi's growth. This means the company's profit growth is not solely dependent on refining but forms a dual-wheel structure of refining and chemical fiber.
Three Strategic Projects Reshaping the Industrial Landscape
Hengyi is currently advancing three strategic projects that will define its growth ceiling over the next five years.
The Brunei Phase II project is fully launched, with adjusted design capacity of 12 million tons per year, producing diesel, PX, benzene, and other high-value products, targeting completion by end-2028. Upon completion, the Brunei refinery's total capacity will reach 20 million tons per year, creating deep industrial synergy. This is the only overseas capacity addition among private mega-refineries in recent years.
The Xinjiang coal-to-ethylene glycol project plans an annual capacity of 2.4 million tons of high-quality fiber-grade coal-to-ethylene glycol, expected to start production in H1 2028. This move will help Hengyi reduce dependence on a single crude oil feedstock, creating a parallel 'oil' and 'coal' feedstock structure.
The Hubei Jingzhou circular new materials project targets waste textile recycling, planning a 300,000-ton annual capacity industrial demonstration project with an 18-month construction period. Aligned with national carbon neutrality goals, it will create a unique 'oil, coal, and fabric' three-pronged industrial structure.
From an industry perspective, these three projects correspond to trends of capacity going global, feedstock diversification, and circular economy. Hengyi is transforming from a traditional refining-chemical fiber company into an integrated 'oil-coal-fabric' new materials enterprise.
Sustainability of High Profitability and Potential Risks
A key question is whether Hengyi's high profitability can be sustained. From an industry logic perspective, the tight supply-demand balance in Southeast Asian refined oil is unlikely to reverse in the short term, supporting the Brunei refinery's high profitability for the rest of the year. Meanwhile, capacity consolidation in the PTA and polyester sectors is ongoing, providing some continuity for profit recovery.
However, risks cannot be ignored.
- Sharp fluctuations in international crude oil prices: A rapid price drop could lead to inventory write-downs and narrowing cracking spreads, directly impacting refining profitability.
- Project delay risks: The Brunei Phase II and Xinjiang coal-to-ethylene glycol projects are capital-intensive with long construction timelines, facing potential funding pressure or schedule delays.
- Regional concentration risk: Core refining capacity is concentrated in Brunei, making it vulnerable to host country policy changes or geopolitical events that could affect cost advantages and feedstock supply stability.
- Downstream demand uncertainty: Weak textile end-demand could dampen polyester segment profit recovery.
For buyers and foreign trade companies, Hengyi's case offers an important insight: companies with global feedstock sourcing often have better supply chain stability and cost advantages than those reliant on a single market.