Behind the Strong Rally in Polyester Upstream: Deepening Supply-Demand Rifts in July Enter a Critical Phase of Chain-Wide Gaming

The strong rally in upstream raw materials is creating an increasingly evident 'disconnect' signal for the polyester chain in July. PX, PTA, and MEG prices have risen in tandem, with PX up 1.37% and PTA up 1.26%, yet this upstream strength has not effectively transmitted to downstream polyester products. The core driver of this rally is not demand recovery, but a concentrated and deep supply-side contraction.

Supply Contraction: PX Operating Rates to Hit Historic Lows

PX is the bellwether of this rally, driven by a sharp tightening in supply. At the end of June, a 4-million-ton-per-year PX unit at Shenghong was fully shut down for a planned 45-day turnaround. Meanwhile, a 660,000-ton-per-year production line at Hainan Refining & Chemical entered a reduced-rate phase expected to last three months. The simultaneous maintenance of multiple major units has led industry bodies to forecast that domestic PX operating rates will fall below 60% in early July, the lowest on record. This supply crunch provides solid bottom-line support for PX prices and has lifted sentiment across the broader chemicals sector.

PTA Maintenance Wave Continues, Capacity Utilization Depressed

On the PTA front, the massive concentrated maintenance cycle that began in April is still ongoing. The total capacity involved in shutdowns and rate reductions has peaked at over 22 million tons, representing more than 20% of national capacity. Daily operating rates have fallen to around 60%, the lowest since October 2021. With maintenance schedules remaining dense through June and July, a significant rebound in PTA capacity utilization is unlikely in the near term. Two key variables for the market to watch: whether rising processing margins will weaken plants' willingness to shut down, and the restart progress of existing idled units—both will directly impact short-term supply additions and price volatility.

MEG: Domestic Contraction in July, Import Surge in August Caps Gains

MEG's supply-demand dynamics show a clear phase divergence. In July, concentrated maintenance and rate reductions at domestic coal-chemical and refining units are expected to significantly lower domestic monthly output, providing some price support from tighter local supply. However, imports are building up: data shows May MEG imports at 200,000 tons, with June and July at similar levels, but institutions estimate August port imports will double to 400,000 tons. This means a wave of imported cargoes in the second half of the year will greatly ease domestic supply tightness and cap MEG prices. Without clear macro catalysts or downstream demand recovery, MEG prices will likely remain in a weak, volatile range.

Weak Downstream Demand in Off-Season, Weaving Operating Rates Down Sharply YoY

Weak demand is the core constraint on the entire chain's upside. July is a traditional off-season for polyester downstream, with no explosive positive catalysts. Weaving data is telling: in June, average operating rates at Jiangsu-Zhejiang weaving mills were just 52.4%, up only 1 percentage point month-on-month but down a sharp 8 percentage points year-on-year. While there has been a slight recovery in orders for autumn/winter fleece fabrics, the market lacks bulk orders. Weaving mills show little willingness to raise operating rates or build inventories, and market participants remain cautious. This downstream weakness means upstream price rallies lack a sustainable demand base.

Key Battleground: Maintenance Compliance vs. Order Recovery

Overall, the polyester chain in July is in a classic 'strong upstream, weak downstream' pattern. Upstream raw materials are supported near-term by supply contraction from concentrated maintenance, but downstream is in a traditional off-season with little prospect of substantial demand improvement. This supply-demand divergence will keep pulling the market in different directions, preventing a clear trend.

Near-term, PX and PTA are likely to remain relatively strong, but MEG gains will be capped by the looming import surge. Whether the market can sustain a longer-term rally hinges on two variables: the pace of end-user weaving order recovery, and the actual execution of maintenance plans versus unit restarts. Crude oil price volatility is also an external wildcard. For industry participants, the current phase calls for multi-dimensional tracking of supply-demand changes, not blind chasing of rallies.

For Buyers - PX and PTA prices are supported near-term by supply contraction but limited by weak downstream demand; procure on a need basis and avoid building expensive inventories. - Watch for the August MEG import surge, which will ease domestic tightness; consider deferring some purchases to lower raw material costs.

For Exporters - The current upstream rally has not yet passed through to downstream products; keep export quotes stable but communicate raw material cost volatility risks with customers to leave room for future adjustments. - Closely monitor order recovery signals from Southeast Asian and European/American weaving markets; if concentrated orders emerge, lock in PTA and MEG supplies early to hedge against later price spikes.