A profit forecast from a leading chemical fiber company has shifted industry focus back to overseas refining and domestic new materials.
Hengyi Petrochemical's June 25 announcement projects net profit attributable to shareholders for the first half of 2026 at RMB 5.5 to 6.0 billion, a year-on-year surge of 2,326% to 2,547%. The first quarter alone contributed nearly RMB 2 billion, while Q2 grew 76% to 101% quarter-on-quarter, forming a steep upward curve.
Profit Sources: Brunei Refining and Polyester Recovery
The core engine is Hengyi's refining project in Brunei. Southeast Asia's refined oil market has long been supply-constrained, and spreads widened significantly in Q1 2026. The Brunei refinery, benefiting from local tax incentives, market-based pricing, and lower freight and insurance costs, operated at full capacity. As the only Chinese chemical fiber company with an overseas refinery, Hengyi has captured the largest benefit from this regional imbalance.
Meanwhile, the 'anti-involution' in the PTA and polyester sectors is taking effect. After years of margin compression from overcapacity, the supply-demand structure showed substantial improvement in the first half of 2026, providing a second pillar for Hengyi's polyester segment. Capacity release in the nylon chain adds a third layer.
Three Key Projects: Reshaping the Raw Material Map
Alongside profit growth, Hengyi is advancing three strategic projects to reduce its dependence on crude oil as a single feedstock.
The Brunei Phase II project, with an optimized design capacity of 12 million tons per year, is expected to be completed by end-2028, bringing total Brunei capacity to 20 million tons per year. This is the only overseas capacity increment among recent private mega-refining projects. The Xinjiang coal-to-ethylene glycol project plans 2.4 million tons per year of fiber-grade MEG, targeting a substitution path using domestic coal resources. The Jingzhou recycling project focuses on waste textiles, planning a 300,000-ton-per-year demonstration facility with an 18-month construction period.
These three projects correspond to 'oil, coal, and fabric' raw material routes. If all are realized, Hengyi will form a unique multi-feedstock structure, helping to smooth profit volatility from crude oil price swings.
Sustainability of High Margins: Risks and Resilience
The key question is whether the 23-fold growth can last. From an industry logic perspective, the tight supply-demand balance in Southeast Asian refined oil is unlikely to reverse quickly, supporting Brunei's high profitability for the year. PTA and polyester capacity optimization has shown tangible effects, and profit recovery has some sustainability. Nylon capacity ramp-up also adds incremental gains.
But risks are real. A sharp drop in crude oil prices would narrow crack spreads and impact refining profits, while also causing inventory write-downs. Brunei Phase II and the coal-to-MEG project are large-scale, long-cycle investments, facing risks of delay or funding pressure. Concentrating core refining capacity in a single region exposes the company to policy or geopolitical changes in Brunei. Weak downstream textile demand could also hinder polyester margin recovery.