Polyester Chain Sees Supply Crunch vs Weak Demand as PX, PTA, Ethylene Glycol Diverge

The polyester chain is experiencing a classic structural tug-of-war between strong upstream and weak downstream. In early July, upstream PX and PTA prices surged due to sharp supply contraction, with PX up 1.37% and PTA up 1.26%. However, downstream weaving operating rates fell 8 percentage points year-on-year, with terminal orders remaining sluggish. This divergence means profit distribution along the chain is shifting significantly, posing direct challenges for buyers and exporters.

Supply Side: PX Operating Rate May Hit Record Low, PTA Maintenance Continues

PX is the clear leader in this price rally. At end-June, Shenghong’s 4-million-ton-per-year PX plant was fully shut for 45 days of maintenance. Hainan Refining & Chemical also reduced output on a 660,000-ton line, with low-load operation lasting three months. The concentrated maintenance of multiple major units has led industry bodies to forecast that domestic PX operating rates will fall below 60% in early July, a historic low. This supply-side contraction is the core logic behind PX’s sustained strength.

For PTA, a massive maintenance cycle began in April, involving peak capacity of over 22 million tons—more than 20% of national capacity. Daily operating rates bottomed near 60%, the lowest since October 2021. Dense maintenance schedules continue through June and July, meaning near-term capacity utilization is unlikely to recover significantly. However, a key variable to watch is processing margins: if margins rise further, some plants may reconsider maintenance plans, directly affecting supply increments.

Demand Side: Weaving Off-Season, Weak Operating Rates

In stark contrast to upstream supply cuts, downstream demand remains tepid. July is the traditional off-season for polyester downstream, with no explosive positive catalysts. In June, average operating rates at Jiangsu-Zhejiang weaving mills stood at 52.4%, up only 1 percentage point month-on-month but down 8 percentage points year-on-year. While fall/winter fleece fabrics saw a slight uptick in niche orders, the market lacks bulk order support, leaving mills reluctant to raise operating rates or build inventories.

This demand weakness directly caps the upside for the entire chain. Polyester finished product prices have risen far less than raw materials, compressing downstream profit margins. Industry participants remain cautious, and a turning point in the second half depends on a clear signal of new orders.

Ethylene Glycol: Domestic Contraction vs Import Surge

Ethylene glycol presents a clear phase-based divergence in July. Domestic coal-chemical and refining units are entering concentrated maintenance or rate reduction cycles, leading to an expected decline in monthly output. This short-term domestic tightening provides some price support. However, imports show a low-first-half, high-second-half pattern: imports were 200,000 tons in May, similar in June and July, but institutions forecast a doubling to 400,000 tons in August. The influx of imported supply in the second half will ease domestic tightness but also cap ethylene glycol price gains. A reversal still requires downstream demand recovery.

Practical Recommendations

For Buyers - Short-term PX and PTA remain firm. Secure July contract volumes early to lock in current relatively low prices and avoid spot premiums from supply contraction. - For ethylene glycol, delay forward purchases given the clear import surge in August, using the price pressure from increased supply to negotiate better terms. - Monitor PTA processing margins and restart schedules. If margins rise enough to ease maintenance plans, raw material prices may correct, offering buying opportunities.

For Exporters - Upstream raw material price hikes are not fully passing through to downstream finished goods. Adjust export quotes upward and consider including raw material price linkage clauses in contracts to protect margins. - Fall/winter fleece fabric orders are recovering slightly but lack bulk. Prioritize short-term and small orders to avoid losses from volatile raw material costs on long-term contracts. - Watch crude oil macro volatility and geopolitical risks, such as Iran’s channel controls. These could further push up raw material costs, so hedge currency and cost exposures in advance.