Shenghong reported a net profit of RMB 4.2-5.0 billion for H1 2026, up 987-1,194% year-on-year, following Hengyi's 23-fold surge. The polyester giant's Q2 profit alone grew 93-149% sequentially and 60-78 times from a low base. The results signal a structural turnaround for China's polyester chain, driven by geopolitical oil spikes and anti-overcapacity policies.
Dual Forces: Oil Shock and Cost Advantage
The geopolitical crisis in early 2026 sent Brent crude from $61/bbl in January to $118/bbl in March, stabilizing around $99/bbl in Q2. Unlike Japanese or Korean refiners that rely heavily on single-source imports, Chinese refineries benefited from diversified crude supply and wider product spreads. Shenghong explicitly attributed its profit surge to improved supply-demand balance and expanding product margins amid rising oil prices.
Capacity Rationalization Reshapes Competition
After years of price wars that pushed PTA margins to negative RMB 200/ton, 2026 marks a turning point. No new PTA capacity came online, while obsolete units both domestically and overseas exited rapidly. This freed up market share for integrated players like Shenghong, which operates 2.8 million tons/year of PX and 6.3 million tons/year of PTA. Industry research notes that the cycle of aggressive expansion is ending, and anti-internal-competition policies are improving supply-demand dynamics.
Downstream Implications for Fabric Sourcing
The profit recovery is cascading from upstream PX/PTA to downstream polyester filament yarn. As yarn prices firm, fabric costs will likely rise. For buyers, this signals a shift from a buyer's to a seller's market.
For Sourcing Managers - Lock in forward contracts for PTA and polyester yarn to hedge against rising costs. - Prioritize integrated suppliers like Shenghong and Hengyi for supply stability and better price negotiation leverage. - Build inventory buffers: oil price dips may offer short-term windows, but the medium-term trend points to higher costs.
For Exporters - Include raw material price adjustment clauses in export contracts to protect margins. - Monitor cost competitiveness of rival producers in Southeast Asia and South Asia. - Emphasize supply chain reliability over price when pitching to overseas buyers.
The polyester chain's "money-printing" era may not last forever, but the worst is clearly over. Every link in the textile value chain must recalibrate pricing strategies for a new equilibrium.