At 354,000 tons, the MEG inventory at East China's main ports as of August 6 marks not only a yearly low but also approaches historic absolute lows. While the market fluctuates with geopolitical tensions, this inventory data has become the core anchor for pricing. This week, MEG fell first then rebounded sharply, with a single-day gain exceeding 5%. Although seemingly driven by news, it is actually a natural reaction of supply-demand fundamentals under extreme inventory levels.
Dual Supply Contraction
The supply tightness in MEG is not caused by a single factor. On one hand, overseas supply remains absent due to blockages in key shipping lanes. Risks in the Strait of Hormuz and the Red Sea's Bab el-Mandeb directly limit export capacity from the Middle East. Even with recent signs of easing, the weeks-long shipping cycle means arrivals cannot be effectively replenished in the short term. On the other hand, domestic plants are in the peak maintenance season from July to August, with several large refining and coal chemical units shut down, bringing industry operating rates to yearly lows. The combined effect of a cliff-like drop in imports and reduced domestic output has repeatedly postponed the inventory accumulation turning point.
This 'distant water cannot quench immediate thirst' situation significantly impacts market participants' expectations. Spot basis continues to strengthen, reflecting traders' reluctance to sell near-month cargoes. For polyester plants, the continuous depletion of raw material inventories implies accumulating replenishment pressure, which is not yet fully reflected in current market prices.
Stable Demand and Inventory Game
Compared with the sharp contraction in supply, demand shows rare resilience. Polyester industry operating rates remain stable, and downstream textile enterprises' rigid procurement has not seen a cliff-like decline. This means that under the supply gap, downstream is continuously consuming port and plant inventories, allowing the destocking process to continue. However, this 'strong reality, weak expectations' pattern also harbors risks—once geopolitical risks are completely resolved and overseas supplies arrive in concentration, prices may face rapid correction pressure.
For buyers, decision-making at this point requires more precision. On one hand, short-term spot tightness supports prices, but chasing highs also carries risks; on the other hand, if procurement is extended to Q4, expectations of supply recovery may offer better entry opportunities.