5,486 yuan — that was the latest quote for the main MEG contract after multiple rounds of gains, a single-day drop of 3.36%. The sharp retreat from a five-year high does not signal a collapse in supply logic, but rather a collision between profit-taking in a high-valuation zone and weakening demand signals. For the textile supply chain, this roller-coaster ride reveals a core contradiction: the geopolitical premium on the cost side remains, but the transmission channel downstream is narrowing.
Supply Side: Import Gap Hard to Bridge
China's MEG import dependence has long remained at a high level, with Middle Eastern supply accounting for over 60%. This structural feature means that when Middle Eastern plants shut down on a large scale or Strait navigation is disrupted, the domestic supply gap cannot be quickly filled by alternative sources or existing plant capacity. Industry public data shows that MEG imports have plummeted since Q2, with market supply continuously tightening.
More critically, geopolitical tensions have continuously delayed expectations for import recovery. MEG monthly imports are expected to remain below 200,000 tons in September and October, keeping spot liquidity persistently tight. This week, total MEG inventories at major East China ports fell to 117,000 tons, setting a historic low. This means that even if futures prices correct, the tight spot market will not change in the short term, and the basis structure will continue to support near-month contracts.
Domestic supply has improved marginally, but the momentum is limited. Last week, overall MEG capacity utilization edged up, with integrated and coal-based MEG loads both returning to around 60%. However, oil-based plants are constrained by feedstock supply, with limited room for further increases; coal-based plants have restarted but incremental releases are gradual, insufficient to reverse the import gap.
Demand Side: Weak Peak Season, Negative Feedback Risks Accumulating
The traditional "Golden September" peak season provides some support, limiting the scope for significant downstream production cuts. But weighed down by weak end-user demand and poor profit transmission along the chain, polyester operating rates fell to 75% last week, at a historically low level for the same period. The actual peak season has underperformed, making it difficult to sustain upward momentum for raw material prices.
From a profit distribution perspective, rising MEG prices are squeezing processing margins for downstream polyester and weaving. If raw material prices continue to climb, the scope of polyester production cuts may expand, creating negative feedback on MEG. This transmission chain — cost push, margin compression, demand contraction — is the most critical risk the market needs to watch.
For buyers, MEG valuations are at relatively high levels, with accumulated profit-taking positions and intensified capital games significantly raising price volatility risks. In the short term, geopolitical uncertainty persists, and combined with low spot inventories, the near-term strength of MEG is hard to reverse quickly. Prices are expected to remain range-bound with an upward bias, but gains will be capped.
Industry Impact: Regional Markets and Product Transmission
From a regional perspective, record-low inventories at major East China ports directly affect raw material procurement rhythms in chemical fiber weaving clusters such as Keqiao and Shengze. Local factories face a dilemma: tight spot supply means rigid demand purchases cannot push prices down, while insufficient end-user orders and slow finished goods digestion dampen willingness to chase high raw material prices.
In terms of product transmission, MEG as a key raw material for the polyester chain will gradually transmit price fluctuations to polyester filament, staple fiber, and downstream fabrics. However, transmission efficiency is currently low because end-user apparel and home textile demand has not shown substantial recovery, and inventory buffers in intermediate stages weaken cost pass-through capacity.
From an export perspective, the impact of Middle East geopolitical conflicts on MEG imports is persistent. Even if conflicts ease temporarily, shipping schedule recovery and plant restarts take time, and the pace of import recovery may be slower than market expectations. This means export-oriented enterprises relying on imported supply need to arrange raw material stocking and cost locking in advance.