International crude oil futures have climbed back above triple digits, with Brent touching $101.25 per barrel and New York crude at $89.16 per barrel, both posting gains of over 1%. For MEG, the cost-side story is hardly new—what truly deserves attention is the sharp drawdown in port inventories, from a peak of 975,000 tonnes in the first half to just 86,000 tonnes. With supply-side fragility amplified, market sentiment has turned decidedly bullish, but whether prices can sustain the rally still hinges on whether downstream buyers are willing to pay up.
Supply Side: Bullish and Bearish Forces at Play
The Middle East is a core production region for global MEG, and the Strait of Hormuz handles a substantial share of chemical exports. With geopolitical tensions persisting, concerns over shipping disruptions and delayed cargoes continue to mount. As a result, domestic port inventories have rapidly depleted and now sit at historically low levels. The market broadly expects import volumes to remain subdued in Q4, providing solid support for spot prices.
Yet the import shortfall may not persist indefinitely. Domestic MEG plant operating rates remain elevated at 65.92%, with coal-based and oil-based units running steadily. Coal-based plants, driven by improved production margins, have reached an operating rate of around 71%. More critically, two large plants—Zhongsha Gulei and Huajin Aramco—are scheduled to come onstream in Q4, giving domestic supply considerable upside elasticity. Once these new units ramp up, they will likely exert notable downward pressure on prices.
Demand Side: Polyester Is the Real Ceiling
The key variable determining the sustainability of MEG's rally lies not in supply, but in downstream polyester. Q4 marks the seasonal transition window for the polyester industry, with the traditional "Golden September and Silver October" peak gradually fading and terminal textile orders losing momentum. Facing relatively high MEG feedstock prices, polyester plants are under mounting cost pressure. Downstream resistance to expensive raw materials is strong, with procurement largely limited to just-in-time buying and little appetite for large-scale stockpiling.
Weakening orders in the weaving segment and heavy pressure to destock finished goods make it difficult for the supply chain to pass through raw material price increases. Additionally, tight PX supply in Q4 is forcing many polyester enterprises to cut production. Once polyester operating rates decline, MEG consumption drops directly. Even if MEG supply contracts temporarily, without a substantive recovery in terminal textile consumption, polyester producers cannot sustain high feedstock costs for long and may further reduce output or conduct maintenance, dragging down MEG demand.
Market Outlook: Range-Bound with Upside, but Limited Height
In summary, rising oil prices, geopolitical disruptions, and low port inventories provide short-term support for MEG, giving prices a foundation for a range-bound, slightly bullish trend. However, supply-side bullish factors alone are unlikely to drive a sustained one-way rally. The extent of any further upside depends on two key variables: first, changes in Middle East shipping conditions and the pace of new domestic plant startups; second, whether terminal textile orders can improve and whether the polyester industry can maintain stable operations.
For buyers, current MEG spot prices have already priced in some supply-side optimism, and the risk of chasing highs is accumulating. If downstream demand fails to materialize and negative feedback pressures emerge across the supply chain, MEG's upside will be significantly capped. Conversely, if Middle East tensions escalate further and disrupt imports, or if polyester operating rates rebound beyond expectations, prices could still see periodic upward spikes.