In the first half of 2026, two profit forecasts from the polyester industry have forced the market to reassess a supply chain once labeled as 'overcrowded.' After Hengyi reported a 2,326% surge in net profit, Eastern Shenghong followed with a forecast of 987% to 1,194% growth. This is not a fluke for individual companies but a signal of a fundamental shift in supply-demand dynamics.
Geopolitical Dividends and Capacity Consolidation
The profit explosion stems from two factors. First, geopolitical tensions drove oil prices higher: the US-Iran conflict escalated in early 2026, disrupting shipping through the Strait of Hormuz. Brent crude surged from $61/bbl in January to $118/bbl in March, stabilizing at an average of $99/bbl in Q2. China, with its diversified crude import channels, faced far less supply chain disruption than Japan or South Korea, allowing domestic refiners to benefit from higher oil prices.
Second, the industry's 'anti-involution' effect took hold. The PX-PTA-polyester filament chain had suffered from overcapacity and price wars, with PTA once losing 200 yuan per ton. But in 2026, no new PTA capacity came online, while outdated capacity both domestically and abroad accelerated its exit. This ceded market share to large integrated players like Shenghong and Hengyi, which operate refinery-petrochemical complexes. Institutional research notes that the current expansion cycle is nearing its end, and supply-demand dynamics are improving.
The Moat of Integrated Leaders
Shenghong's forecast shows Q2 net profit grew 93% to 149% quarter-on-quarter, and 60 to 78 times year-on-year. The company attributed this to improved supply-demand in the petrochemical sector, wider product spreads driven by higher crude oil prices, and stable operations at its integrated refinery project. With 2.8 million tons/year of PX capacity, 6.3 million tons/year of PTA, and over 10 million tons of total aromatics chain capacity, its full-chain vertical integration provides strong profit elasticity amid oil price volatility and expanding spreads.
For downstream weaving mills and buyers, this signals a shift in raw material cost volatility and supply stability. While surging upstream profits often imply a higher raw material price floor, integrated leaders are also more incentivized to maintain price stability rather than squeezing downstream through price wars as they did in the past.
The New Logic After Oil Price Correction
Notably, international oil prices have corrected after geopolitical tensions eased, but the growth of Shenghong and Hengyi is not solely dependent on oil. The structural improvement from capacity consolidation and 'anti-involution' policies is a more enduring driver. With no new PTA capacity, a supply ceiling has been reached; the exit of outdated capacity simultaneously boosts market share and pricing power for leaders.
For the broader textile industry, the profit recovery in the polyester chain is reshaping the bargaining dynamics between upstream and downstream. In the past two years, downstream firms enjoyed low raw material costs, but the new normal likely involves moderate price increases and a supply structure concentrated among top players.