The polyester industry is redefining the profitability benchmark. Following Hengyi Petrochemical's announcement of a net profit surge of over 23-fold in the first half of 2026, Dongfang Shenghong released a performance forecast on July 5, expecting net profit attributable to shareholders of listed companies to be between 4.2 billion and 5 billion yuan for H1 2026, a year-on-year increase of 987.39% to 1194.51%. More notably, the company's Q2 net profit rose 93% to 149% quarter-on-quarter and 60 to 78 times year-on-year. These figures indicate that the profit recovery in the polyester chain is not an isolated case but a microcosm of the overall industry recovery.
Two Core Drivers of Profit Recovery
Shenghong attributed its performance improvement to three factors: improved supply-demand dynamics in the petrochemical industry, expanded product spreads driven by higher crude oil prices, and stable operations of integrated refining and chemical projects. Two clear logic lines emerge upon analysis.
The first is the oil price dividend from geopolitical tensions. In early 2026, the US-Iran conflict escalated, disrupting shipping through the Strait of Hormuz. Brent crude surged from $61 per barrel at the start of the year to $118 per barrel in March, stabilizing at an average of $99 per barrel in Q2. Due to China's diversified crude oil import channels, the impact of the blockade was far less severe than for countries like Japan and South Korea that rely on single sources. Domestic refining companies became beneficiaries of oil price volatility. Shenghong has a PX capacity of 2.8 million tons/year, a PTA capacity of 6.3 million tons/year, and a benzene capacity of over 1 million tons/year, with total aromatics chain capacity exceeding 10 million tons. Its integrated refining and chemical layout fully leveraged profit elasticity during the oil price uptrend.
The second driver is capacity clearance driven by anti-involution policies. Over the past two years, the PX-PTA-polyester filament chain suffered from 'involutionary losses,' with PTA losing up to 200 yuan per ton at its lowest. However, 2026 saw a reversal: no new PTA capacity was added, while outdated capacity at home and abroad accelerated its exit, ceding market share to domestic integrated leaders. Institutional research reports indicate that the current industry expansion cycle is nearing its end, and the 'anti-involution' policy continues to advance, potentially further improving supply-demand dynamics. This means that even if international oil prices retreat after geopolitical tensions ease, the dividends from capacity clearance are only beginning to materialize.
From Hengyi to Shenghong: A Typical Sample of Chain Transmission
The simultaneous profit explosions of Hengyi and Shenghong are not isolated events. Hengyi's H1 net profit surged 2326% to 2546%, partly benefiting from its overseas Brunei facility and the special factor of the Strait of Hormuz blockade. However, Shenghong's growth came entirely from the normal operation of its domestic integrated refining and chemical projects, which better reflects the substantial improvement in industry fundamentals. The synchronized explosion of two leading companies indicates that the profit inflection point for the polyester chain has arrived and the trend is sustainable.
From a chain perspective, Shenghong's profit growth primarily stems from expanded spreads in the aromatics chain. In the PX-PTA-polyester filament chain, PX and PTA are core links in integrated refining. Shenghong's PX and PTA capacities rank among the top domestically, and it is equipped with products like styrene, phenol, acetone, and propylene oxide, forming a complete aromatics chain. This vertically integrated layout allows the company to maximize profit elasticity when product spreads widen.
Industry Outlook: Clearance Effects Will Continue to Unfold
Currently, the core variable for the polyester industry is no longer oil prices but capacity structure. The past two years of involutionary competition have eliminated a large amount of outdated capacity. The supply-demand pattern for PTA has shifted from surplus to balance or even tightness. Top companies with scale advantages, cost advantages, and higher chemical yields have stronger certainty in benefiting from the recovery. For other polyester leaders that have not yet released semi-annual reports, Q1 profit figures were already impressive, and Q2 performance is expected to be no worse.
However, caution is needed as oil price corrections may compress short-term spreads. Brent crude has fallen from its March high of $118 per barrel to an average of $99 per barrel in Q2. If geopolitical tensions further ease, oil prices may continue to decline, putting pressure on refining companies' profits. Nevertheless, the supply-demand improvement driven by capacity clearance is structural, and its support for industry profits will outweigh the impact of oil price fluctuations.