Polyester Giant Soars: Shenghong's H1 Net Profit Surges Up to 12-Fold, Signaling a Cyclical Turning Point

The polyester industry is witnessing a collective profit surge. Following Hengyi Petrochemical's forecast of a 23-fold increase in H1 net profit, Dongfang Shenghong released its H1 2026 earnings guidance on July 5, projecting net profit attributable to shareholders of RMB 4.2-5.0 billion, a year-on-year increase of 987%-1194.5%. This implies Q2 net profit reached RMB 2.77-3.57 billion, up 93%-149% quarter-on-quarter, approaching historical highs.

Why Profits Exploded

The underlying logic is straightforward but amplified by multiple factors. First, geopolitical oil price tailwinds: escalating US-Iran tensions in early 2026 disrupted Hormuz Strait shipping, pushing Brent crude from $61/bbl in January to $118/bbl in March, with Q2 averaging $99/bbl. Chinese refiners, with diversified crude import channels, suffered less impact than Japan and South Korea, becoming beneficiaries. Shenghong, with 2.8 million tons/year PX capacity and 6.3 million tons/year PTA capacity, turned this oil price surge into inventory gains and wider product spreads.

Second, the 'anti-involution' policy is reshaping competition. In the past two years, the PX-PTA-polyester filament chain suffered 'involutionary losses', with PTA losing RMB 200/ton at its worst. But in 2026, no new PTA capacity was added, and outdated overseas capacity is accelerating its exit, ceding market share to integrated leaders. Research notes indicate the expansion cycle is nearing its end, allowing leading companies to leverage their cost and yield advantages. Shenghong's official statement attributed the performance to 'improved supply-demand dynamics and wider product spreads driven by rising oil prices'.

Industry Transmission and Market Outlook

These forecasts are not isolated. Upstream profit surges will gradually transmit downstream to fabric and apparel. Currently, profits concentrate in refining-integrated segments, but PTA and polyester filament spreads are also recovering. For downstream weaving mills, raw material costs may face short-term upward pressure, but long-term, capacity exits mean improved supply chain stability and stronger bargaining power for top suppliers.

Market attention on polyester stocks is rising. Q2 is typically a slack season, but Shenghong's 93%-149% QoQ profit growth indicates demand hasn't weakened significantly. As the traditional peak season approaches in Q3, profit elasticity may further expand. However, oil prices have corrected to around $90/bbl after geopolitical tensions eased, narrowing the oil-driven profit expansion window.

Implications for Buyers and Mills

For Buyers - Monitor raw material price volatility: With Q3 peak season approaching, polyester prices may stay elevated. Consider locking in long-term contracts early to avoid spot cost spikes. - Evaluate supplier mix: Integrated leaders offer supply stability but have stronger pricing power. Diversify sources and watch for capacity exit risks among smaller suppliers. - Use hedging tools: PTA futures and spot markets are closely linked. Consider hedging strategies to manage raw material price risks.

For Weaving and Dyeing Mills - Control inventory cycles: Oil price corrections may lead to phased polyester price declines. Adopt just-in-time purchasing to avoid inventory devaluation. - Optimize product mix: As profits concentrate upstream, downstream mills should focus on differentiated products (e.g., functional fabrics, recycled fibers) to enhance value addition. - Monitor capacity exit signals: Capacity exits create opportunities for orders to concentrate in high-quality mills. Improve equipment utilization and quality control to attract top brand orders.