According to a research report from Guolian Minsheng Securities, multiple supply shocks in 2025 have tightened the supply landscape, driving the market price of H-acid upward and raising production costs for reactive and acid dyes. The high market concentration has significantly enhanced supply-side coordination, strengthening manufacturers' bargaining power and pushing up the price of reducing agents substantially. With rigid supply constraints on intermediates, integrated dye companies are expected to see both volume and price increases as seasonal demand picks up. In the long term, stable demand from textile printing and dyeing, combined with rising intermediate prices, will lift the profitability baseline for integrated dye leaders.

Key points from Guolian Minsheng Securities:

On July 28, 2026, data from Baichuan Yingfu showed that the latest ex-factory price of H-acid from Dachaidan Hexin Technology reached 100,000 yuan per ton, a surge of about 150% from 40,000 yuan per ton at the beginning of the year. During the same period, the core intermediate reducing agent hit 120,000 yuan per ton. On July 21, Zhejiang Longsheng and Runtu Co., Ltd. implemented their second synchronized price increases in a month, raising the Disperse Black 300% series by 3,000 yuan per ton and other varieties by a uniform 1,000 yuan per ton.

Supply shortage drives H-acid prices higher

H-acid is a key intermediate raw material for producing reactive, acid, and direct dyes. Its production involves hazardous sulfonation and nitration reactions, posing long-term environmental and safety pressures. Multiple supply shocks have converged in 2025: (1) a nitration workshop explosion at Liyuan Technology's 4,500-ton-per-year H-acid facility; (2) a fire at Wuhai Yadong that limited H-acid unit operations, with recovery still below full capacity; and (3) the suspension of Runtu Co., Ltd.'s H-acid capacity since May 2023. Domestic effective H-acid capacity is less than 60,000 tons per year, and the tightening supply environment is pushing market prices upward, raising production costs for reactive and acid dyes.

High supply concentration boosts reducing agent prices

Reducing agents are irreplaceable core raw materials for disperse dyes. Their production involves hazardous nitration and hydrogenation steps, with long-standing environmental and safety regulatory constraints and difficult approval for new capacity. Current domestic compliant effective capacity stands at only 48,000 tons, with stable mass production qualifications limited to three companies: Ningxia Zhongsheng New Technology, Zhejiang Longsheng, and Runtu Co., Ltd. This high market concentration has significantly enhanced supply-side coordination, strengthening manufacturers' pricing power and driving a sharp rise in reducing agent prices.

Cost transmission chain clear, dye price rally likely to continue

The improved competitive landscape in the domestic dye industry provides a foundation for cost transmission. The CR4 for disperse dyes is 70.69%, and for reactive dyes it is 64.91%, giving leading companies pricing power. After a subdued off-season in April-May, inventory levels of H-acid and reducing agents at external-purchasing manufacturers have dropped to low levels, forcing them to procure high-priced spot supplies for subsequent production. As the "golden September and silver October" peak season for textiles approaches in the third quarter, downstream printing and dyeing restocking demand will gradually release, and a tightening supply-demand balance will facilitate smooth cost pass-through.

Key companies to watch:

(1) Zhejiang Longsheng, an integrated dye company with a dual-intermediate layout; (2) Runtu Co., Ltd., an integrated dye company with reducing agent supporting capacity; (3) Jinji Co., Ltd., a dye company ramping up new H-acid capacity; and (4) Jihua Group, a dye company with potential for H-acid unit restart and strong earnings flexibility.

Risk factors:
Downstream textile and apparel demand recovery may fall short of expectations; changes in environmental and safety production regulatory policies; potential new capacity for long-term intermediates; unexpected safety incidents in chemical production facilities; and slower-than-expected dye price pass-through after raw material price increases.