A rare supply shock in the chemical industry delivered a broad boost to a cohort of domestic players in the first half of this year, with Wanhua Chemical Group Co.,Ltd. capturing the largest earnings uplift among them.
Wanhua Chemical Group Co.,Ltd. recently posted its H1 2026 results, with revenue reaching RMB 119.316 billion, up 31.26% year-on-year, and net profit attributable to shareholders hitting RMB 10.063 billion, a surge of 64.35%. Gross margin for the second quarter alone stood at 19.04%, the highest for that period in five years, and profit growth far outpaced revenue expansion, underscoring the quality of this earnings surge. The company also declared an interim dividend of RMB 8.10 per 10 shares (tax inclusive), based on a total share capital of 3.13 billion shares as of June 30, 2026, amounting to roughly RMB 2.536 billion.
Behind the results, external price tailwinds and internal cost restructuring worked in tandem. Meanwhile, Wanhua Chemical Group Co.,Ltd.'s battery materials business is entering a phase of intensive rollout, with new lithium iron phosphate capacity expected to reach 820,000 tonnes this year, gradually crystallizing a second growth trajectory beyond its core operations.
Where the opportunity emerged
In the first half of the year, global chemical supply chains underwent significant turbulence. Tensions in the Middle East, according to the International Energy Agency, slashed global daily oil supply by around 8 million barrels, triggering production cuts across numerous chemical plants. European giants such as BASF and Covestro issued price hike notices to customers in succession. Domestic markets reacted swiftly, with polymer MDI prices climbing from roughly RMB 14,200 per tonne in early January to an April peak of about RMB 20,700 per tonne—a near 40% jump within six months.
As overseas supply tightened, Chinese chemical firms absorbed more export demand. Wanhua Chemical Group Co.,Ltd. saw sustained growth in MDI and TDI exports, with volume and price gains driving a marked improvement in profits. This upturn was not unique to the company—Eastern Shenghong projected a year-on-year net profit increase of up to 1,190% for H1, signalling a broader sector recovery. National Bureau of Statistics data shows the PPI for chemical raw materials and products rose 12.7% year-on-year in May, reversing a 30-month downward trend.
Yet external price hikes alone cannot fully account for Wanhua Chemical Group Co.,Ltd.'s profit elasticity. The petrochemical segment had long been the company's weak link. As its largest revenue contributor, its gross margin was a mere 0.58% in 2025. To address this, the company initiated a shutdown and revamp of its 1-million-tonne ethylene plant in Yantai in June 2025, restarting operations in January 2026 with a core upgrade: flexible switching between ethane and propane feedstocks. The ethane route achieves a cracking yield of 78% to 82%, versus just 39% to 44% for propane—a substantial gap that translates into savings of over RMB 1,200 per tonne. To secure a steady ethane supply, the company brought in Kuwait Petroleum Corporation with a USD 638 million stake in the Yantai petrochemical base, locking in 1 million tonnes of annual long-term ethane supply, and built its own liquefied ethane shipping fleet, cutting ocean freight costs by around 40%. Since ethylene is a feedstock for MDI and TDI, the cost reduction flowed downstream to the polyurethane segment, lifting overall profitability.
Looking at the industry landscape, Europe plans to shutter 700,000 to 1.1 million tonnes of MDI capacity between 2026 and 2027, nearly 40% of the region's total. Multiple industry insiders expect limited new global MDI capacity before 2030, with essentially no new TDI capacity arriving before end-2027. Entering the traditional peak season in H2, product prices are likely to remain supported. Risks persist, however: polymer MDI prices have already retreated from their highs, and a rapid softening of feedstock prices cannot be ruled out if regional tensions ease.
Second growth curve taking shape
While the core business runs smoothly, Wanhua Chemical Group Co.,Ltd.'s battery materials push is now entering its execution phase. In the first half of this year, two projects were unveiled or approved. In June, the company's subsidiary Wanhua (Binzhou) New Energy Materials Technology Co., Ltd. initiated an environmental impact assessment for a 70,000-tonne-per-year lithium carbonate project in Binzhou, Shandong. In August, the Yantai Municipal Ecology and Environment Bureau approved Wanhua Chemical (Penglai) Co., Ltd.'s 240,000-tonne-per-year iron phosphate project, with a total investment of around RMB 1.5 billion. This marks the Penglai base's first foray into lithium battery materials—previously focused on petrochemicals and fine chemicals—and will complement the Haiyang and Laizhou lithium iron phosphate bases in Yantai through proximity supply. On the funding front, the company's two major battery business platforms together raised approximately RMB 3.7 billion in additional capital, broadly in step with capacity construction.
Wanhua Chemical Group Co.,Ltd.'s entry into the lithium battery sector dates back to its 2020 acquisition of Yantai Zhuoneng, marking six years in the space. In 2025, the RMB 16.8 billion Haiyang next-generation battery materials industrial park broke ground, with 2026 delivering concentrated results. The first phase of Haiyang, with 100,000 tonnes of annual lithium iron phosphate capacity, commenced production in March. Phases two and three in Haiyang and phase one in Laizhou, totalling roughly 720,000 tonnes, are slated for completion within the year, bringing total new capacity to 820,000 tonnes. Beyond cathode materials, the company has planned about 980,000 tonnes of iron phosphate capacity across Hubei, Tongling, Meishan, and Penglai to support self-sufficiency in precursor supply.
The battery business remains in its investment phase: Wanhua Battery Technology posted 2025 revenue of RMB 8.562 billion with a net loss of RMB 174 million. But the industry environment is improving. According to data from shengyishe.com, as of June 24, 2026, the average price of power-grade lithium iron phosphate stood at approximately RMB 61,000 per tonne, up nearly 80% year-on-year, with industry operating rates holding above 85%. CITIC Securities forecasts global lithium iron phosphate cathode shipments to reach 5.25 million tonnes in 2026, up about 36% year-on-year. As new capacity ramps up and prices recover, when the battery business will turn profitable is the key question markets will continue to watch.
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