Brent crude has climbed back above $101 per barrel, with NYMEX crude approaching the $90 mark. The rise in feedstock costs has once again pushed monoethylene glycol (MEG) into the spotlight across the chemical fiber supply chain. But one signal deserves close attention: port inventories have been compressed from a first-half peak of 975,000 tonnes down to just 86,000 tonnes. The price elasticity at such historically low inventory levels raises a fundamental question — is this the starting point of a sustained rally, or a short-term sentiment overshoot? The answer requires unpacking both supply and demand.
Supply Side: Bullish and Bearish Forces at Play
The Middle East situation is the single largest source of uncertainty in the MEG market today. The Strait of Hormuz handles a substantial share of MEG chemical exports, and persistent regional tensions are fueling concerns about shipping disruptions and delayed vessel schedules. These concerns are not unfounded — should Middle East cargo loading rhythms be disrupted, China's import volumes would remain low through Q4, keeping port inventories weak and providing solid support for spot prices.
Yet the other side of the supply equation cannot be ignored. Domestic MEG plant operating rates remain at a relatively high 65.92%, with coal-based units — driven by improved production margins — running at approximately 71%. More critically, two large facilities, Zhongsha Gulei and Huajin Aramco, are scheduled to come online in Q4. This means the incremental elasticity of domestic supply is considerable. The gap left by reduced imports could be partially or even fully offset by rising domestic output.
For factories, this implies procurement strategies need to be more flexible — the one-sided logic of over-relying on imported cargo is weakening, and a window for domestic substitution may open in Q4.
Demand Side: Polyester Is the Real Ceiling
The core variable determining the sustainability of MEG's price rally lies not on the supply side but in the downstream polyester industry. Q4 marks the transition window between peak and off-peak seasons for polyester. The traditional "Golden September and Silver October" peak is gradually winding down, and downstream textile orders are clearly losing momentum. Facing relatively high MEG feedstock prices, polyester plants are under mounting cost pressure. Downstream resistance to expensive feedstock is strong, with procurement largely limited to just-in-time buying. Appetite for proactive, large-scale stockpiling remains weak.
The weaving segment is equally strained. With weak orders and significant pressure to destock finished goods, the阻力 to passing upstream price increases down the chain is formidable. Meanwhile, tight PX supply in Q4 is forcing many polyester enterprises to cut operating rates. Once polyester output declines, it directly reduces MEG feedstock consumption.
Even if MEG supply contracts in the short term, without a substantive recovery in end-use textile consumption, polyester producers cannot sustain high feedstock costs for long. The possibility of further rate cuts or maintenance shutdowns persists, which would in turn drag down MEG demand. Once this negative feedback loop takes hold, supply-side bullish factors will be largely offset by demand-side weakness.
Key Variables for the Market
In sum, rising oil prices, geopolitical disruptions, and low port inventories provide short-term support for MEG, giving prices a foundation for range-bound strength. However, supply-side bullish factors alone are unlikely to drive a sustained one-way rally. The upside potential hinges on two key variables: first, changes in Middle East shipping dynamics and the pace of new domestic plant startups; second, whether textile end-use orders can improve and whether the polyester industry can maintain stable operating rates. If downstream demand fails to materialize and the negative feedback loop intensifies, MEG's upside will be significantly capped.