Polyester Giants Soar: Shenghong's H1 Net Profit Surges Over 10-Fold Amid Anti-Internal Competition and Geopolitical Dividends

In the first half of 2026, the polyester industry transformed from a loss-making sector into a profit powerhouse. Following Hengyi Petrochemical's announcement of a 23-fold surge in net profit, Shenghong Group's subsidiary, Eastern Shenghong, released a forecast on July 5, projecting a net profit of RMB 4.2-5.0 billion for the first half, up 987%-1195% year-on-year. The second-quarter net profit increased by 93%-149% quarter-on-quarter and a staggering 60-78 times year-on-year. This data not only exceeded market expectations but also prompted a re-evaluation of the profit logic in the polyester chain.

Dual Engines of Profit Explosion Behind Shenghong's stellar performance are dual drivers: geopolitical dividends and industry structural optimization. Externally, the U.S.-Iran conflict in early 2026 disrupted Hormuz Strait shipping, pushing Brent crude from $61/barrel in January to $118/barrel in March, with the second-quarter average stabilizing at $99/barrel. China, with diversified crude import channels, suffered less impact than Japan and South Korea, benefiting domestic refiners. Shenghong, with over 10 million tons of aromatics capacity including PX, PTA, and benzene, directly profited from the widening product spreads due to rising oil prices. Internally, China's anti-internal competition policies have yielded results. Over the past two years, the PX-PTA-polyester filament chain suffered from overcapacity and price wars, with PTA once losing RMB 200 per ton. But in 2026, no new PTA capacity was added, and outdated capacity at home and abroad accelerated exit, ceding market share to integrated leaders. Institutional research indicates that the industry expansion cycle is nearing its end, improving supply-demand dynamics. Shenghong's integrated refinery-petrochemical project operated smoothly, amplifying profit elasticity.

Industry Divergence: Leaders Dominate, SMEs Struggle The stellar results of Shenghong and Hengyi do not reflect the entire industry. Profits are concentrating among top players. Integrated leaders with complete crude-to-polyester chains can absorb raw material fluctuations through refining and squeeze smaller players with cost advantages in PTA and polyester filament. For example, Shenghong's PX capacity of 2.8 million tons/year and PTA capacity of 6.3 million tons/year give it unit costs far below the industry average. Small and medium enterprises lacking upstream-downstream integration face shrinking survival space under volatile oil prices and rising environmental costs. This means the polyester 'profit machine' is exclusive. For buyers, future bargaining power may weaken; for foreign trade firms, supply chain risks from rising concentration must be monitored.

Oil Price Correction vs. Long-Term Anti-Internal Competition Despite the H1 profit surge, challenges remain. With geopolitical tensions easing, international oil prices have corrected, with Brent falling to around $90/barrel by late Q2. Lower oil prices will directly compress refining spreads, potentially pressuring Shenghong's Q3 profits. However, capacity phase-out from anti-internal competition is a more sustainable positive. After old plants retire, industry operating rates improve, and the supply-demand balance for PTA and polyester filament is being rebuilt. Institutions expect the polyester chain to maintain high sentiment in H2 2026, but growth will shift from 'explosive' to 'steady'. For textile companies, this means raw material cost volatility will moderate, but increased pricing power of leaders should be watched.

Practical Recommendations ### For Buyers - Focus on long-term contracts for PTA and polyester filament; current leader bargaining power is strong; consider quarterly or semi-annual lock-in agreements. - Diversify sourcing to avoid over-reliance on single leaders; monitor inventory clearance opportunities from SMEs. - Use oil price correction windows to increase raw material inventory moderately below $90/barrel to hedge future fluctuations.

For Foreign Trade Firms - Assess supply chain stability: Rising leader concentration may extend delivery times; establish backup channels with multiple suppliers. - Monitor exchange rate-oil price linkage: RMB volatility combined with oil price corrections may affect USD export pricing; adjust pricing strategies flexibly. - Preemptively develop differentiated products: Basic polyester filament profits are dominated by leaders; shift to high-value fabrics or functional fibers to avoid price wars.