Polyester feedstock prices staged a strong rally in early July, with PX, PTA, and MEG leading the gains across the chain. PX rose 1.37% in a single day, while PTA gained 1.26%, boosting market sentiment upstream. However, downstream polyester end-products struggled to follow suit as weaving remains in a traditional off-season, creating a clear supply-demand divergence between upstream and downstream segments. Whether this rally can sustain hinges on the interplay between maintenance execution and demand recovery.
Supply Contraction Drives Feedstock Strength
The core driver behind the feedstock rally is active supply contraction. For PX, Shenghong's 4-million-ton-per-year unit was fully shut down in late June, with maintenance expected to last 45 days. Hainan Refinery also reduced output on one 660,000-ton line for three months. Industry estimates suggest domestic PX operating rates will fall below 60% in early July, a historic low. This sharp supply cut directly supports PX prices, making it the leading gainer.
PTA has been undergoing a massive maintenance wave since April, with peak capacity involved exceeding 22 million tons, or over 20% of national capacity. Daily operating rates have dropped to around 60%, the lowest since October 2021. June and July maintenance schedules remain dense, with little near-term recovery in utilization. Notably, if processing margins widen, some plants may delay maintenance, so actual execution warrants close monitoring.
MEG shows a phased divergence. Domestic coal-based and refinery units are undergoing concentrated maintenance in July, reducing local output and providing some price support. However, imports are set to rise significantly—May imports were about 200,000 tons, with June and July at similar levels, but August imports are expected to double to 400,000 tons. This inflow will cap MEG gains, limiting its upside.
Weak Demand Caps Upside
In stark contrast to upstream strength, downstream polyester and weaving remain weak. July is a traditional off-season for polyester end-use, with no major demand catalysts. Polyester operating rates are likely to stay low, with market focus on upstream maintenance and restart schedules rather than demand-driven momentum.
Weaving data reinforces this caution. In June, average operating rates at Jiangsu and Zhejiang weaving mills stood at 52.4%, up just 1 percentage point month-on-month but down 8 points year-on-year. While autumn/winter fleece fabrics have seen modest order upticks, large-batch orders remain absent. Mills are reluctant to boost output or build inventory, reflecting a cautious stance. The market awaits a clear signal of new order releases to trigger a turnaround.
This means that even if upstream feedstock remains strong due to supply cuts, the price transmission will hit a bottleneck if end-demand fails to recover, preventing a sustained rally.