In the first half of 2026, China's polyester supply chain witnessed a profit explosion. The six major listed leaders together reported estimated net profits exceeding 27 billion yuan, with year-on-year growth ranging from 94% to 2,547%. Hengli Petrochemical led with 7.2 billion yuan, while Hengyi Petrochemical surged over 2,300%. This earnings boom is no accident but the result of a triple convergence: geopolitical premium, capacity optimization, and integration advantages.
Geopolitical Premium and Chain Transmission
The US-Iran conflict at the start of 2026 disrupted shipping in the Strait of Hormuz, sending Brent crude from $61/barrel to $118/barrel, with Q2 averaging $99. China's diversified crude import channels cushioned the shock, making domestic refiners beneficiaries of the oil price rally. Higher crude prices widened spreads for PX, PTA, and polyester filament. Integrated plants at Hengli (20 million tons/year refining, 16.6 million tons/year PTA), Shenghong (over 10 million tons of aromatics capacity), and Rongsheng (global mega-refining complex) ran at full capacity, translating upstream cost advantages downstream. Spread recovery was the most direct driver of profit growth.
Anti-Involution Policy Reshapes Supply
Over the past two years, PTA and polyester filament suffered severe overcapacity, with PTA losing 200 yuan/ton at its worst. In late 2025, top fiber producers voluntarily cut output for POY and FDY. Dual-carbon policy tightened new capacity approvals, accelerating the exit of outdated capacity. No new PTA capacity came online in H1 2026, and domestic and overseas capacity closures ceded market share to integrated leaders. Tongkun Group saw significant spread recovery in PTA and polyester filament, while Xinfengming's net profit grew 94.59% to 111.51%, attributing gains to supply-demand optimization. Analyst reports indicate the expansion cycle is ending, and anti-involution policies should further improve the supply-demand balance.
Scale Effects of Integrated Capacity
All six leaders have built full-chain layouts from refining to polyester. Hengli's deep integration of oil, coal, and chemicals, Shenghong's PX-PTA-polyester vertical chain, and Rongsheng's mega-refining complex at ZPC provide strong cost absorption and production flexibility. Hengyi's Brunei Phase II, coal-to-ethylene glycol projects, and waste textile recycling initiatives add future profit potential. High utilization rates and continuous technical upgrades are the foundation for earnings growth. Shenghong's Q2 net profit rose 93%-149% quarter-on-quarter and 60-78 times year-on-year, demonstrating the amplifying effect of capacity elasticity during an upcycle.
Geopolitical Risks and Sustainability
Renewed tensions in the Middle East point to irreversible upward pressure on crude prices. For upstream-integrated polyester leaders, higher oil means wider spreads and fatter margins. But two risks warrant attention: excessively high oil may dampen downstream demand, and the consistency of anti-involution policy implementation remains uncertain. ZPC, a key investment income source for Tongkun, has unaudited financials subject to adjustment. Overall, the recovery trend is established, but its trajectory depends on geopolitical developments and domestic capacity control.