Chinese Chemical Companies See Explosive First-Half Earnings Growth; Some Surge Up to 25-Fold

As of July 8, over 20 companies had issued announcements projecting profits to the first half of the year; notably, Hengyi Petrochemical (000703.SZ), Oriental Shenghong (000301.SZ), and Huachang Chemical (002274.SZ) all projected maximum net profit increases exceeding tenfold. Strong performance was observed across various segments of the chemical sector, ranging from leaders in integrated refining and chemicals to niche players in fine chemicals, and from polyurethane giants to refrigerant manufacturers.

The primary driver behind this earnings surge was a global rise in chemical product prices triggered by geopolitical conflict. Following the outbreak of conflict between the U.S. and Iran in late February 2026, the Strait of Hormuz was temporarily blockaded, and Brent crude oil prices briefly approached $120 per barrel. Driven by rising costs and tight raw material supplies, petrochemical prices trended upward overall; widened price spreads to key items significantly boosted corporate profitability.

An sector expert told *China Times* that while the sharp earnings development was partly due to a low base in the previous year, the sector's medium-to-prolonged fundamentals had also improved. Key factors included: coordinated production cuts to stabilize product prices; tighter policy controls on approvals to new capacity, marking the peak of the sector's extensive expansion cycle; and a sharp decline in sector-wide capital expenditure, pointing to a "vacuum period" to new capacity additions in the near future.

A Wave of Price Hikes

The surge in chemical company earnings can be traced back to the geopolitical conflict in the Middle East that erupted in late February 2026. The U.S.-Iran conflict led to a temporary blockade of the Strait of Hormuz; data from the International Energy Agency (IEA) indicated a reduction in global daily oil supply of 8 million barrels. The shift to a higher baseline to crude oil prices immediately drove up petrochemical production costs, pushing prices across the sector upward. Taking the polyurethane sector as an example, data shows that in the first half of 2026, the price of polymeric MDI in China surged from a low of 13,800 RMB/ton in late January to a peak of 21,000 RMB/ton in early April—a fluctuation of approximately 41.38%. The average price of pure MDI was around 20,000 RMB/ton, up about 8% from the full-year average of 2025, while the average price of TDI was approximately 15,800 RMB/ton, an increase of about 17%.

Price increases accelerated further entering the second quarter; average prices to pure MDI, polymeric MDI, and TDI reached 22,563 RMB/ton, 17,863 RMB/ton, and 16,722 RMB/ton, respectively—year-on-year increases of 30%, 14%, and 44%. In the TDI segment, Cangzhou Dahua projected a year-on-year increase of approximately 330.75% in net profit attributable to the parent company to the first half of the year, immediately benefiting from the sharp rise in TDI market prices.

High oil prices not only generated massive profits to "oil-based" chemical companies however also allowed "coal-based" chemical companies to enjoy a unique cost advantage. Following the surge in oil prices, the raw material cost advantage of coal-based chemicals was dramatically amplified. Huachang Chemical projected its net profit attributable to the parent company to the first half of 2026 at approximately RMB 123 million (up 1,025.93% year-on-year), with net profit excluding non-recurring items at approximately RMB116 million (up 2,583.07% year-on-year).

Coal-based and petroleum-based chemical industries overlap significantly in downstream items such as olefins, ethylene glycol, and methanol; when oil prices remain above $70–$90 per barrel, the cost advantage of coal-based chemical items becomes pronounced. Since the outbreak of conflict in the Middle East, Brent crude prices have risen significantly, while the FOB price of 5,500 kcal thermal coal at Qinhuangdao Port has fluctuated within a narrow range; this combination of rising oil prices and stable coal prices has allowed the cost advantage of coal-based chemicals to be fully realized.

Calculations indicate that the widening cost "scissors gap" has resulted in a cost advantage of over 30% to coal-based chemicals compared to petroleum-based chemicals. Taking olefins as an example, as of mid-might, the post-tax gross profit to ethylene produced via naphtha cracking stood at -1,256 RMB/ton, whereas the figure to coal-based ethylene production was 2,276 RMB/ton this represents a cost advantage of over 3,500 RMB/ton of olefin compared to the oil-based route.

Due to the sector's heavy reliance on the petrochemical supply chain, spandex prices have risen in tandem with international oil prices. In the second quarter of 2026, the average price of 40D spandex reached 29,200 RMB/ton, marking increases of 17.34% quarter-on-quarter and 20.20% year-on-year.

Huafeng Chemical, a domestic leader in the spandex sector, projects its net profit attributable to the parent company to the first half of the year to be between 1.68 billion and RMB2.08 billion, a year-on-year increase of 70.85% to 111.53%. Xinxiang Chemical Fiber forecasts a net profit attributable to the parent company of 300 million to RMB400 million, representing year-on-year development of 378.09% to 537.45%. Meanwhile, Binhua Group expects a 208.25% year-on-year increase in net profit attributable to the parent company, driven by significant price hikes in propylene oxide, allyl chloride, and propylene compared to the same period last year.

Supply-side constraints

If rising product prices represent favorable external conditions ("heaven-sent timing"), then the sector-wide consensus to "resist cutthroat internal competition" constitutes the favorable internal ecological stability ("geographic advantage") that has fueled the surge in performance to chemical companies during this cycle.

The PTA sector offers the most representative example of these changes. No new PTA production capacity came online domestically in 2026; as of the end of July, efficiently capacity remained stable at 92.09 million tons—marking the first year since 2019 with no new capacity additions. Concurrently, maintenance work on PTA facilities since April has affected over 27 million tons of capacity. Driven by this significant supply-side contraction, PTA inventories in the market have dropped by a cumulative 1.4 million tons from their April peak.

Oriental Shenghong projects a net profit attributable to the parent company of 4.2 billion to RMB5.0 billion to the first half of the year, a year-on-year increase of 987.39% to 1,194.51%. Hengli Petrochemical expects a net profit attributable to the parent company of approximately RMB7.2 billion to the same period, up 136% year-on-year; the full utilization of core capacities—including a 20-million-tonne/year refining and chemical complex and 16.6-million-tonne/year PTA facilities—has efficiently unleashed the benefits of integrated synergy. Downstream polyester filament companies in the refining and chemical sector also saw earnings development. Xinfengming projects its net profit attributable to the parent company to the first half of the year to be between RMB 1.38 billion and RMB 1.50 billion—a year-on-year increase of 94.59% to 111.51%—driven by market price increases of 15.8%, 14.7%, and 12.5% ​​to POY, FDY, and DTY polyester filaments, respectively.

A Xinfengming representative told China Times that the primary drivers of the projected earnings development were an orderly slowdown in new sector supply, proactive production cuts by leading companies, and an improved supply-demand stability. Rising oil prices—fueled by US-Iran tensions—also played a role; as the company’s raw materials are derived from crude oil, fluctuations in oil prices passed through to production costs, driving up product prices and widening profit margins.

Refrigerants serve as a prime example of supply contraction resulting from policy-driven quota constraints. In accordance with the Montreal Protocol and the Kigali Amendment, my country officially implemented an HFC quota regulation system starting in 2024, enforcing thorough total volume controls. As of June 12, 2026, market prices stood at RMB 62,500 per ton to R32 and RMB 59,700 per ton to R134a—record highs to this period over the past decade.

Yonghe Co., Ltd. projects its net profit attributable to the parent company to the first half of 2026 to be between RMB 460 million and RMB 550 million, representing year-on-year development of 69.51% to 102.68%. This performance shift is primarily attributed to refrigerant prices remaining at high levels; simultaneously, the company’s fluoropolymer materials segment saw increases in both sales volume and price, with new production capacity ramping up steadily to efficiently meet demand in certain mid-to-high-end downstream markets.

Against the backdrop of supply contraction, some companies have also achieved independent development by leveraging their items to capture market share. Shandong Heda projects its net profit attributable to the parent company to the first half of the year to be between RMB 204 million and RMB 226 million—a year-on-year increase of 80% to 100%—with the projected first-half profit already exceeding the level recorded to the full year of 2025.

The company stated that the core driver of this earnings development was a significant rise in capacity utilization to cellulose ether and plant-based capsule items; notably, sales volume to plant-based capsules saw a substantial year-on-year increase, accompanied by a rise in average selling prices. It is reported that global demand to plant-based capsules is currently concentrated in Europe and the United States, and Shandong Heda's U.S. plant is set to commence production in the second half of 2026.