In early July, the polyester chain saw a price rally led by upstream feedstocks PX, PTA, and MEG, while downstream weaving remained mired in a traditional off-season. This divergence between a hot upstream and a cold downstream indicates that the current rally is driven more by supply-side contraction than by genuine end-demand recovery.
Supply-Side Contraction: PX Operating Rate May Hit Historic Low
PX is the core driver of this rally. In late June, multiple large PX plants began maintenance, including Shenghong's 4-million-ton-per-year unit going fully offline for about 45 days, and Hainan Refining's 660,000-ton-per-year line entering a three-month reduced-load phase. Industry estimates suggest that domestic PX operating rates could fall below 60% in early July, the lowest level on record. This sharp supply contraction directly supports PX prices, which rose 1.37%.
For PTA, a massive concentrated maintenance cycle began in April, involving total capacity exceeding 22 million tons, or over 20% of national capacity. Daily operating rates dipped to around 60%, the lowest since October 2021. Maintenance plans remain dense through June and July, making a quick recovery unlikely. Two key variables warrant attention: if processing margins rise, plants may delay maintenance; and restart progress of idle units will directly affect short-term supply.
MEG shows a phased divergence. In July, domestic coal-based and refining units are undergoing concentrated maintenance, with monthly output expected to decline significantly, providing price support from tight local supply. However, import trends are opposite: improved sea lane access has led to rising arrivals. Data shows May MEG imports at 200,000 tons, with June and July at similar levels, but August imports are expected to double to 400,000 tons. This forward import surge will cap MEG gains, and a trend reversal requires downstream demand recovery.
Weak Demand: Weaving Off-Season Hampers Chain Transmission
The upstream rally hinges on supply contraction, but weak demand remains the core constraint on the chain's upside. July is a traditional off-season for downstream polyester consumption, with no explosive positive catalysts. Polyester operating rates are likely to stay low.
Weaving data confirms this. In June, average operating loads at Jiangsu-Zhejiang weaving mills were 52.4%, up just 1 percentage point month-on-month but down 8 percentage points year-on-year. While autumn/winter fleece fabrics see slight order improvements, the market lacks bulk orders, and mills are reluctant to raise operating rates or build inventory. Sentiment remains cautious, and the market's turning point depends on fresh order releases in the second half.
This divergence means upstream price support is hard to transmit downstream. For polyester mills, rising feedstock costs squeeze margins while end-product pricing power is limited, intensifying the squeeze.