Juglar Cycle Restart: The Large Refining Sector May Experience an Upturn in Prosperity

The essence of cycle theory lies in identifying the rhythms of economic operation. When equipment investment cycles resonate with inventory cycles, the chemical industry, which has been under long-term pressure, is approaching a critical turning point. Historically, the Juglar cycle, centered around equipment renewal, typically spans 7 to 10 years, with its initiation often synchronized with economic recovery. Comparing this to the pace of domestic capacity expansion, the previous industry peak occurred in Q3 2021, with earlier peaks in 2017 and 2011. Following this timeline, 2026 is highly likely to mark the start of a new Juglar cycle, and the refining and chemical sector, benefiting from deep supply-side clearing, may be on the verge of a turning point in prosperity.

Supply contraction is the core narrative of this cycle. Since 2022, bulk petrochemical products represented by ethylene have suffered four consecutive years of losses, with industry investment willingness hitting a low point. More critically, policy restrictions on approvals for refining, ethylene, PX, and other bulk products have continued to tighten. In September 2025, the Ministry of Industry and Information Technology and six other departments jointly issued the “Work Plan for Stabilizing Growth in the Petrochemical Industry (2025–2026),” explicitly stating “controlling refining and reducing oil, increasing chemical production,” strictly controlling new refining capacity, and scientifically regulating the pace of new ethylene and PX capacity releases. Several listed companies’ early investment plans have already encountered setbacks. Data shows that from 2026 to 2028, investment growth in the petrochemical industry will slow to around 4%, significantly below the past five years’ average annual ethylene consumption growth of 10%. Even if future demand growth slows back to 6–8% due to base effects, the supply-demand gap remains clear.

The upstream PX segment in the industry chain has already validated this logic. Domestic refining capacity has reached a ceiling, and as a byproduct of refineries, new PX capacity will inevitably be limited. In 2024 and 2025, there have been no new PX capacity additions domestically for two consecutive years. The only highly certain incremental capacity in 2026 comes from Huajin Amei’s 2 million-ton plant, which is expected to start production in Q4. Rongsheng Petrochemical, leveraging Zhejiang Petrochemical’s 40 million tons per year refining capacity and its 8.8 million-ton PX capacity, has become the world’s largest PX producer, fully benefiting from margin expansion. In Q3 2025, the company’s net profit attributable to shareholders reached 286 million yuan, a surge of 14,279.4% year-over-year and a 1,992.91% quarter-over-quarter increase, demonstrating a strong profit recovery momentum.

Downstream along the industry chain, the PTA sector is replicating the PX recovery path. In 2025, the PTA industry experienced nearly a year of losses, with operating rates just over 70%. The turning point appeared in December 2025, when, under the influence of policies against internal competition (“anti-involution”), industry leaders proactively initiated supply-side management. Tongkun Co., with a nominal PTA capacity of 10.2 million tons, actively participated in industry coordination. In the first three quarters of 2025, it achieved a net profit attributable to shareholders of 2.361 billion yuan, with forecasts for 2026 reaching 3.582 billion yuan and potentially hitting 4.409 billion yuan in 2027. Hengli Petrochemical, with its integrated advantage of 16.6 million tons of PTA capacity (the largest globally) and 5.2 million tons of PX capacity, achieved a net profit attributable to shareholders of 1.972 billion yuan in Q3 2025, up 81.5% year-over-year and 97.4% quarter-over-quarter, demonstrating strong earnings resilience. Currently, the six leading PTA companies account for 74% of capacity, and with favorable conditions for joint production cuts, industry concentration is increasing, laying a foundation for profit recovery.

From a global perspective, capacity reduction is even more intense: outside China, the Middle East has only sporadic new capacity additions; many projects in North America have been canceled; and traditional chemical powerhouses like Europe, Japan, and South Korea are in capacity decommissioning stages. Over the next three to five years, global ethylene capacity additions are expected to total only 6 to 7 million tons per year, with an annual growth rate of about 1%, insufficient to support the fundamental demand. Hengli Petrochemical’s 20 million tons per year crude oil processing capacity and Rongsheng Petrochemical’s Zhejiang project with 4.2 million tons of ethylene processing capacity—these world-class integrated refining and chemical facilities—have clear advantages in crude oil adaptability and cost control, further consolidating their leading positions amid industry reshuffling.

When the Juglar cycle’s equipment renewal demand coincides with supply-side clearing creating a supply-demand gap, the industry turning point in 2026 will likely no longer be a matter of probability but of timing. From the early rise in prices of by-products like sulfur and petroleum coke, to the sustained high margins of PX, and the bottoming out and rebound of PTA profits, the prosperity transmission chain in the refining and chemical sector is already clear. For refineries and chemical companies that have endured four years of winter, the cycle’s balance is tipping in favor of the supply side.