The polyester industry is redefining what it means to be a 'money printer'.
Following Hengyi Petrochemical's forecast of a 2,326% to 2,546% year-on-year surge in H1 net profit, Shenghong Co. announced on July 5 that it expects H1 2026 net profit attributable to shareholders to be between RMB 4.2 billion and RMB 5.0 billion, a year-on-year increase of 987% to 1,194%. In Q2 alone, Shenghong's net profit surged 93% to 149% quarter-on-quarter, and a staggering 60 to 78 times year-on-year. These explosive results from two leading players signal a powerful rebound for the entire polyester chain, which had been mired in deep losses for the past two years.
Background
Shenghong attributed its performance surge to three factors: improved supply-demand dynamics in the petrochemical sector, expanded product spreads driven by rising crude oil prices, and stable operations of its integrated refining and chemical projects. This reflects a fundamental shift in the industry's macro environment.
On the supply side, the core PX-PTA-polyester filament chain reached an inflection point in 2026. In previous years, PTA losses of RMB 200 per ton were common as overcapacity fueled price wars. But in 2026, no new PTA capacity came online, while outdated capacity both domestically and internationally accelerated its exit, ceding market share to integrated leaders. Institutional research notes that the current expansion cycle is nearing its end, with 'anti-involution' policies continuing to improve the supply-demand balance.
On the demand side, geopolitical conflict served as a key catalyst. The U.S.-Iran conflict escalation in early 2026 disrupted shipping through the Strait of Hormuz, pushing Brent crude from $61/barrel at the start of the year to a peak of $118/barrel in March, with Q2 averaging $99/barrel. China's diversified crude import channels cushioned domestic refiners from the shock, turning them into beneficiaries of the oil price volatility.
Industry Impact
The earnings explosion at Shenghong and Hengyi is not an isolated case. While other polyester leaders have yet to release H1 forecasts, their Q1 profit reports were already strong, and Q2 performance is expected to follow suit. This marks the industry's transition from a 'cannibalizing loss' phase to an 'upswing' cycle.
For the supply chain, this means:
- Pricing power for upstream PX and PTA is concentrating among integrated leaders. Shenghong boasts 2.8 million tons/year of PX capacity and 6.3 million tons/year of PTA capacity, with total aromatics chain capacity exceeding 10 million tons. This scale advantage maximizes profits when spreads widen.
- Downstream weaving and fabric mills face cost pass-through pressure. Rising crude oil prices push up polyester filament costs, but end-demand for apparel has not surged in sync, potentially squeezing margins in the middle of the chain.
- Outdated capacity elimination is accelerating. Under 'anti-involution' policies, smaller players without scale advantages will find it harder to survive, further increasing industry concentration.
Notably, international oil prices have corrected after the geopolitical tensions eased. But the benefit for leaders like Shenghong extends beyond oil price volatility; it is rooted in the long-term dividend from capacity structure optimization. As outdated capacity exits and market share consolidates among leaders, profitability will remain higher than during the 'cannibalizing' period, even if oil prices retreat.