In the first half of 2026, China's polyester chain saw a rare profit bonanza. Six leading enterprises—Hengli, Hengyi, Rongsheng, Shenghong, Tongkun, and Xinfengming—released semi-annual performance forecasts showing net profit growth by multiples, with Hengyi's surge reaching 2,326% to 2,547% and Shenghong's approaching 10-fold. This far exceeded market expectations and signaled the industry's exit from years of 'involutionary losses' into a new upcycle.
Profit Explosion: Oil Windfall Meets Anti-Capacity War
Data reveals massive profit scales. Hengli Petrochemical projected H1 net profit of ~RMB 7.2 billion, up 136%; Rongsheng Petrochemical forecast RMB 5.0-5.2 billion, up over 730%; Tongkun Group expected RMB 4.1-4.5 billion, up over 270%; even smaller player Xinfengming anticipated RMB 1.38-1.5 billion, nearly doubling.
The underlying logic is straightforward. In early 2026, US-Iran conflict disrupted Hormuz Strait shipping, driving Brent crude from $61/bbl in January to $118/bbl in March, stabilizing at around $99/bbl in Q2. Chinese refiners, benefiting from diversified crude sourcing, faced less supply disruption than single-source countries like Japan and South Korea, emerging as oil price winners. Higher crude prices directly expanded spreads for downstream products like PX, PTA, and polyester filament, transmitting profits from upstream to midstream.
Simultaneously, the industry's 'anti-involution' campaign gained traction. Over the past two years, severe overcapacity in PTA and polyester filament led to price wars, with PTA once losing RMB 200/ton. In late 2025, top fiber producers reached a voluntary production cut agreement, actively reducing operating rates for mainstream products like POY and FDY. Coupled with dual-carbon policies tightening new capacity approvals and accelerating exit of outdated capacity, supply contracted orderly. With mild demand recovery, processing spreads for PTA and polyester filament improved significantly versus last year—the second core profit driver.
Integrated Chain Advantage: Who Runs Faster?
Profit growth was uneven. Hengyi led with over 23-fold growth, driven by its Southeast Asian refining business. CITIC Securities noted persistent tight supply of refined products in Southeast Asia, with spreads widening sharply in early 2026, making its Brunei project a profit engine. Hengyi is also investing in waste textile recycling and coal-to-ethylene glycol projects, promising future growth.
Shenghong's growth was also remarkable, with Q2 net profit up 93-149% quarter-on-quarter and 60-78 times year-on-year. Its integrated refining complex operated smoothly, with total aromatics chain capacity exceeding 10 million tons/year, amplifying benefits from margin expansion.
Tongkun and Xinfengming benefited more from polyester filament recovery. Tongkun's investee Zhejiang Petroleum and Chemical showed significantly improved profitability, contributing substantial investment income. Xinfengming explicitly attributed growth to optimized supply-demand dynamics and voluntary production cuts.
For buyers, this upcycle means stronger upstream pricing power and higher raw material price volatility. Polyester filament and PTA price centers may keep rising, forcing downstream weaving and apparel firms to reassess procurement strategies and inventory management.
Sustainability: Two Key Variables
Looking ahead, whether high profits persist depends on two variables: crude oil price trajectory and enforcement of 'anti-involution' policies.
Geopolitically, Middle East tensions remain. Hormuz shipping has partially recovered, but US-Iran confrontation is unresolved, with potential for another oil price spike. For domestic refiners, moderate oil price increases help maintain product spreads; but too rapid hikes could choke demand, squeezing margins.
Industrially, 'anti-involution' has moved from consensus to action. Research notes the expansion cycle is nearing its end, with no new PTA capacity and accelerated exit of outdated capacity domestically and globally, ceding market share to integrated leaders. However, whether voluntary production cuts hold long-term remains uncertain. If price rallies prompt some producers to restart or expand, supply pressure could return.
Overall, H1 2026's stellar results reflect a confluence of oil windfall and industry self-discipline. Integrated leaders reaped maximum benefits in this upcycle. The industry's key challenge is converting short-term gains into long-term competitiveness, avoiding the 'expansion-overcapacity-loss' loop.