The support from the cost side has softened, sending the polyester chain into the red. The main PTA futures contract plunged over 2% in afternoon trading, closing at 5,560 yuan/ton, erasing some of the week's gains. However, the chain showed divergence, with ethylene glycol relatively resilient, reflecting structural differences in supply-demand dynamics across varieties.
Cost Side: Geopolitical Premium Fades Amid PX Maintenance
The retreat in international oil prices was the direct trigger for the polyester chain's weakness. Earlier, Iran's tightening of strait controls and US-Iran tensions had pushed up the risk premium on crude oil. But with ceasefire rumors emerging, market concerns over supply disruptions have marginally eased. As the upstream source of the polyester chain, oil price fluctuations quickly transmit downstream, with PTA bearing the brunt.
However, the pressure from the cost side is not one-way. PX, which accounts for over 90% of PTA production costs, is currently in its annual maintenance window. Multiple mega-scale units at Shenghong Refining, Hainan Refining, and Zhejiang Petrochemical have been shut down, involving over 9 million tons of capacity. Monthly production losses are estimated at 800,000-900,000 tons. PX operating rates have fallen to 59.4%, with the Asian average dropping to 56.6%, a year-to-date low. This means that even if oil prices correct, the tight PX supply is still providing implicit cost support for PTA.
Supply Side: Record PTA Maintenance, Destocking Cycle Continues
Since April, the domestic PTA industry has launched an unprecedented wave of concentrated maintenance. Total capacity involved in shutdowns and load reduction has exceeded 22 million tons, accounting for over 20% of domestic capacity. Daily PTA capacity utilization once fell to around 60%, the lowest since October 2021. The scale of units scheduled for maintenance in June-July remains large, suggesting utilization will stay low.
Inventory data confirms the reality of tightening supply. As of early July, domestic PTA social inventories stood at 3.05 million tons, a cumulative destocking of 1.4 million tons from the April high. The destocking cycle has lasted three months, with absolute inventory levels now below those of the same period in the past two years. However, caution is needed: as processing margins recover to high levels, the actual execution rate of maintenance may decline, and the restart progress of idled units requires continuous monitoring.
Demand Side: Peak Season Restocking Expectations Yet to Materialize
Demand has not yet entered the traditional peak season, but recovery expectations are brewing. Currently, the polyester industry's comprehensive operating rate is 80%, at a low level for recent years. Raw material inventories at downstream yarn mills and fabric mills are also at three-year lows, implying significant restocking elasticity once orders pick up.
Seasonally, autumn/winter orders in the textile market will gradually emerge from August. Although overseas textile and apparel demand remains relatively weak, domestic seasonal restocking is sufficient to absorb marginal supply increments, preventing a rapid shift to a loose supply-demand balance in the short term. For PTA, the key variable is not the absolute level of demand but the timing mismatch between restocking pace and supply contraction.
Price Outlook: Short-Term Volatility, Mid-Term Focus on Supply Execution
In the short term, cooling geopolitical risks are weighing on commodity sentiment, and with no substantial industrial drivers, PTA spot prices are likely to oscillate along with the cost side. The expected range for East China PTA spot negotiations is 5,770-5,860 yuan/ton.
From a medium-term perspective, supply-side support from PX maintenance, low PTA operating rates, and destocking remains intact. If autumn/winter order restocking proceeds as expected and polyester operating rates rise, PTA could see a phase of supply-demand mismatch. However, attention must be paid to the impact of unit restarts as processing margins recover and potential volatility in oil price geopolitical premiums.