When ethylene glycol closed limit-up at 5,331 yuan/ton in late August, market attention shifted from pure supply-demand data to the deep reshaping of supply chains by geopolitical risks. This limit-up was not an isolated event but an inevitable result of the resonance between import disruptions and domestic output cuts—East China main port inventories fell to a record low of 178,000 tons, down 90,000 tons from the previous week, indicating extremely fragile supply elasticity. For polyester plants, this is not just another cost shock but a turning point to re-examine raw material procurement logic.
Event Background
Ethylene glycol supply contraction shows a clear 'double whammy' from external and internal factors. Externally, the Strait of Hormuz shipping issue continues to ferment. Although imports rebounded marginally to 260,000 tons in July, re-blockade of the strait is expected to drag August imports back below 200,000 tons, compared with an average monthly import volume of around 600,000 tons in the same period of previous years. September port forecasts remain low, and considering shipping schedules, import recovery will take time. These figures reveal a stark reality: Middle East geopolitical risk has become a normalized variable for EG supply, not a short-term disturbance.
Internally, concentrated plant maintenance in July-August, with the shutdown of two large units from Sheng Hong and BASF as the main factor amplifying losses, reduced daily output from 50,000-52,000 tons in June to around 48,000 tons. Although these units have gradually restarted since late August, along with Yangmei and Tianye, supply recovery takes time, and the tight balance will be hard to reverse in the short term. Notably, this output cut is not entirely voluntary—under profit erosion, some plants chose maintenance to avoid losses, reflecting intensified profit distribution conflicts along the supply chain.
Industry Impact
The strong rise in EG has begun to transmit to the polyester chain. Rapid raw material price rebounds have kept polyester industry in losses, especially for staple fiber and bottle chips. Under profit erosion, polyester plants have increased active output cuts, with operating rates falling below 80% in July and further to 75% by late August. However, a detail easily overlooked is that despite lower operating rates, annual new polyester capacity of 2.2 million tons keeps the overall rigid demand relatively high. This means demand is not truly weak but passively contracted under profit squeeze—once raw material prices ease, operating rates may rebound quickly.
For buyers, the current high basis pattern deserves caution. September destocking will likely continue, and floor and spot prices will fluctuate widely under macro factors. This implies that procurement strategies relying solely on price signals may fail; companies need to pay more attention to geopolitical dynamics and shipping schedules rather than just watching screen quotes. Meanwhile, under low inventories, suppliers' bargaining power has significantly strengthened, putting downstream plants at a disadvantage in procurement negotiations. Locking in long-term contracts in advance or seeking diversified supply sources becomes increasingly important.