Polyester Industry Profit Surge: The Logic Behind Shenghong and Hengyi's Explosive Earnings

In the first half of 2026, the polyester industry has shifted from a 'loss quagmire' to a 'profit bonanza.' Eastern Shenghong's July 5 earnings forecast predicts a net profit of 4.2 to 5 billion yuan, a year-on-year increase of over 10 times. This follows Hengyi's earlier announcement of a 23-fold surge. These back-to-back results signal a fundamental shift in profit distribution logic within the polyester chain.

Dual Engines of Profit Explosion

Two key drivers fuel this earnings boom: geopolitical factors widening crude oil price spreads, and industry 'anti-involution' policies improving supply-demand balance.

On the crude side, the 2026 US-Iran conflict disrupted Hormuz Strait shipping, pushing Brent crude from $61/barrel in January to $118/barrel in March, with Q2 averaging around $99/barrel. Chinese refiners, benefiting from diversified import channels, suffered less impact than Japan and South Korea. Shenghong's integrated refinery ran smoothly, leveraging its 2.8 million tons of PX and 6.3 million tons of PTA capacity to capture margin gains.

Internally, the PX-PTA-polyester filament chain had suffered two years of 'involutionary losses,' with PTA losing 200 yuan per ton at its worst. But in 2026, no new PTA capacity came online, while outdated capacity globally exited faster, ceding market share to integrated leaders. Research reports indicate the expansion cycle is nearing its end, and with continued anti-involution policies, the supply-demand balance is set to improve further. This suggests that even if oil prices retreat, the profit center for leading firms may remain elevated.

Profit Transmission and Differentiation

Shenghong's earnings structure reveals profit transmission within the chain. Q1 net profit was 1.432 billion yuan, while Q2 is expected to reach 2.768 to 3.568 billion yuan, a sequential increase of 93%-149%. This indicates that despite crude oil's Q2 pullback, refining product spreads widened further, reflecting stronger end-demand absorption of high costs.

With over 10 million tons of aromatics chain capacity, including PX, PTA, benzene, styrene, and phenol, Shenghong's 'mega-chemical' layout allows flexible product mix adjustments to capture the highest-margin segments during oil price volatility. In contrast, single-segment polyester firms may struggle to replicate this profit elasticity.

However, the profit surge carries hidden risks. High margins could incentivize idle capacity restarts or attract new capital, reigniting oversupply. Historically, polyester industry cycles rarely last beyond two quarters. For downstream weaving and apparel firms, raw material cost pressure is mounting rapidly.

Practical Recommendations

For Buyers - With polyester raw material prices high, adopt short-term contracts with floating pricing to avoid locking in long-term high-cost agreements. - Monitor PTA and polyester filament inventory changes; if social inventory rises for two consecutive weeks, consider slowing purchases. - When signing long-term contracts with integrated leaders like Shenghong or Hengyi, negotiate price linkage to Brent crude, not just spot market quotes.

For Exporters - Rising raw material costs have already impacted fabric and apparel export pricing. Include a 'raw material price adjustment clause' in contracts, allowing renegotiation when PTA or polyester filament prices fluctuate by more than 5%. - Monitor Southeast Asian market dynamics: if Chinese polyester profits remain high, orders may shift to lower-cost regions like Vietnam or Bangladesh. - Use futures tools to hedge polyester filament procurement costs against oil price volatility.