Brent crude touched $101.25 per barrel while NYMEX crude stood at $89.16, with both benchmarks gaining more than 1%. For the textile supply chain, the most direct transmission channel of this oil rally is not cotton or polyester filament, but ethylene glycol (MEG), a critical upstream input for polyester. Cost expectations have already ignited market sentiment, yet whether MEG can sustain a rally depends on whether supply-side narratives can outweigh demand-side realities.
Supply Side: A Tug-of-War Between Low Inventory and Incremental Capacity
The most visible support for MEG supply comes from inventory. According to China Customs and industry public data, domestic port MEG stocks have fallen from a first-half peak of 975,000 tons to 86,000 tons, sitting at historically low levels. This shift is not driven by a demand surge but by disruptions to Middle East shipment schedules — the Strait of Hormuz handles a substantial share of MEG chemical exports, and uncertainty over shipping lanes has directly raised the risk of vessel delays. Market expectations that Q4 imports will remain low provide near-term support for spot prices.
But low inventory is not unbreakable. Domestic plant operating rates stand at 65.92%, with coal-based units climbing to around 71% on improved production margins. More notably, two large plants — China Sand Polyethylene and Huajin Aramco — are scheduled to start up in Q4, adding considerable elasticity to domestic supply. This means that once domestic cargoes accelerate, the gap left by contracted imports will be partially filled, capping upside room.
For buyers, the core supply variable is not the inventory figure itself but the race between Middle East shipping recovery and domestic plant startup timelines. If geopolitical disruptions persist while new plants are delayed, the low-inventory pattern will continue; conversely, an inflection point toward looser supply could arrive earlier than the market expects.
Demand Side: Polyester's Tolerance Is the Real Ceiling
The key variable determining MEG's rally height has always been downstream polyester. Q4 marks the seasonal transition window for textiles, with the traditional "Golden September and Silver October" peak gradually winding down, terminal weaving orders lacking follow-through momentum, and finished goods inventory destocking pressure transmitting upward. The supply chain's tolerance for feedstock price hikes is declining.
Polyester plants currently face a double squeeze. On one hand, MEG prices are at relatively high levels, intensifying cost pressure; on the other, tight domestic PX supply in Q4 has forced some polyester producers to cut operating rates. Downstream resistance to high-priced feedstock is strong, with procurement strategies shifting toward just-in-time buying on a need-only basis, and willingness to build large inventories is clearly lacking. Once polyester operating rates decline, MEG consumption will drop directly, creating a negative demand feedback loop.
This means that even if MEG supply contracts temporarily, polyester producers cannot sustain high feedstock costs for long without a genuine recovery in terminal textile consumption, and the possibility of further rate cuts or maintenance remains. For traders, the biggest risk is not falling prices but shrinking liquidity — when downstream appetite for taking high-priced cargo is weak, selling becomes significantly harder.
Outlook: Range-Bound with an Upward Bias, But No One-Way Rally
Taking both supply and demand together, rising oil prices, geopolitical disruptions, and low port inventory collectively form a near-term floor for MEG with a range-bound upward bias. But supply-side positives alone are unlikely to drive a sustained one-way rally. The ultimate price ceiling depends on two core variables: supply dynamics from Middle East shipping changes and domestic plant startups, and whether terminal textile orders can improve and polyester can maintain stable operations.
If downstream demand fails to materialize, negative feedback pressure across the supply chain will gradually emerge, and MEG's upside will be notably compressed. For factories, the more pragmatic strategy now is to lock in essential volumes and control feedstock inventory cycles rather than chase rallies. For exporters, watch for the lagged effect of polyester feedstock cost volatility transmitting into fabric quotes, and reserve more flexible price adjustment clauses when taking orders.