The polyester chain, which had rallied on upstream maintenance shutdowns, has recently weakened again. On July 21, PX futures fell over 2%, dragging PTA, MEG, and other products into the red, erasing earlier gains. This trend highlights a core contradiction in the textile upstream market: the positive impact of supply contraction has been fully priced in, while demand-side weakness is now the dominant force.
Record Maintenance Scale, Supply Contraction Priced In
On the upstream side, maintenance shutdowns for PX and PTA have indeed reached historic levels. For PX, several million-ton units at Shenghong Refining, Hainan Refining, and Zhejiang Petrochemical have been shut down, involving over 9 million tons of capacity. The industry operating rate fell to 59.4%, with Asia's overall rate dropping to a year-low of 56.6%. Monthly production losses are estimated at 800,000-900,000 tons.
The PTA adjustment has been even more dramatic. Since April, the industry has launched an unprecedented wave of concentrated maintenance, with shutdowns and load reductions affecting over 22 million tons of capacity—more than 20% of total domestic capacity. Daily capacity utilization once fell to about 60%, the lowest since October 2021. By early July, PTA social inventories had fallen to 3.05 million tons, down 1.4 million tons from the April peak, with a destocking cycle lasting three months. Absolute inventory levels are now below those of the same period in the past two years.
However, this strong supply-side contraction has failed to sustain price increases. The market's interpretation is that maintenance expectations have already been priced in, and uncertainties about unit restarts and the risk of lower maintenance compliance as processing fees recover are undermining bullish confidence.
Terminal Demand 'Hand-to-Mouth', Downstream Unable to Absorb Price Hikes
The core variable suppressing the polyester chain is terminal textile demand. The industry is currently in a traditional off-season, compounded by widespread high temperatures and heavy rain across the country. The comprehensive operating rate of weaving in Jiangsu and Zhejiang remains at multi-year lows. Downstream factories generally maintain a cautious 'hand-to-mouth' procurement strategy, lacking the motivation for large-scale stockpiling.
This means that even if upstream forcibly reduces supply and pushes up prices through maintenance, terminal demand cannot effectively absorb the increases. Polyester factories face a dilemma: raw material price increases are difficult to pass downstream, while product inventory pressure mounts. The profit distribution along the chain is shifting subtly—upstream bargaining power has strengthened due to maintenance, but downstream tolerance has reached its limit, leading to a 'price without volume' stalemate.
For textile companies, this situation compresses the raw material procurement window. If demand remains weak, polyester chain prices may decline further, potentially offsetting the supply gap from upstream maintenance and even leading to temporary oversupply.
Cost Support Weakens, Oil and Geopolitical Risks Recede
In addition to demand factors, changes on the cost side cannot be ignored. International crude oil prices once plunged overnight, and although they recovered somewhat, the boosting effect on the polyester chain has significantly weakened. Market concerns about escalating conflict in the Middle East are fading—the possibility of negotiations between Iran and the US has eased supply-side risk premiums.
PX accounts for over 90% of PTA production costs. Falling oil prices directly weaken PX's cost support, which then transmits to PTA and downstream polyester products. With demand already weak, the loosening of cost support is like adding insult to injury.
Outlook: Three Key Variables to Watch
Overall, the polyester chain is in a 'weak supply and weak demand' pattern, but demand-side factors are more dominant. Future trends hinge on three key variables:
First, the actual compliance rate of PTA plant maintenance. As processing fees recover to high levels, will companies still strictly implement maintenance plans? The restart progress of idled units will directly affect the sustainability of supply contraction.
Second, the pace of downstream restocking. Whether terminal orders can show marginal improvement after the off-season will determine if polyester factories can successfully destock and resume procurement.
Third, the direction of international oil prices. The evolution of geopolitical tensions in the Middle East remains an important variable affecting the cost side. If oil prices continue to weaken, the bottom support for the polyester chain will move lower.