EG Limit-Up: Geopolitical Risks Reshape Polyester Feedstock Supply

Geopolitics has once again become the core pricing driver for the polyester supply chain. On the last trading day of August, ethylene glycol futures hit the daily limit-up, closing at 5,331 CNY/ton, redirecting market attention to the fragility of Middle East shipping lanes and global chemical supply chains. This price surge is not an isolated event but a typical reaction of import-dependent feedstocks to external shocks.

Supply Side: Dual Squeeze from Imports and Maintenance

The direct driver behind this rally comes from two supply-side pressures. First, the risk of navigation through the Strait of Hormuz continues to escalate, significantly hindering import shipments. Industry data shows that July imports marginally recovered to 260,000 tons, but with the strait re-blocked, August imports are expected to fall below 200,000 tons, compared with an average monthly import volume of around 600,000 tons in previous years. With no clear timeline for resuming navigation, September port forecasts remain low, and considering shipping schedules, imports are unlikely to improve significantly in the short term.

Second, domestic plant operating rates are recovering slowly. During July-August, maintenance at two large units (Sheng Hong and BASF), coupled with unplanned shutdowns at Yangmei and Tianye, reduced daily output from 50,000-52,000 tons in June to around 48,000 tons. Although some units are restarting at the end of August, supply recovery takes time, and the overall tight supply pattern is unlikely to reverse quickly.

Inventory and Demand: Game Under Low-Level Tight Balance

Supply contraction is directly reflected in inventory data. As of August 27, total MEG inventory at East China main ports was only 178,000 tons, down 90,000 tons from the previous week, hitting a record low. Continuous destocking and low inventories form a tight balance, providing strong support for prices.

On the demand side, the market shows characteristics of "volume decline but quality stability." Due to the rapid rebound in raw material prices, the polyester industry is suffering sustained losses, especially in staple fiber and bottle chips. Companies are actively reducing production, with operating rates falling below 80% in July and only 75% at the end of August. However, with 2.2 million tons of new polyester capacity added this year, the overall rigid demand remains relatively high despite lower operating rates. This means that demand contraction has not offset the upward price pressure from supply tightness, but rather amplifies price elasticity under low inventories.

Market Outlook: High Basis and Wide Fluctuations

Looking ahead to September, low imports and ongoing destocking are expected to maintain a high basis, with spot and futures prices fluctuating widely due to macroeconomic factors. For industry players, this situation presents both risks and opportunities.

For Buyers - Monitor geopolitical developments and signals of strait reopening, adjust procurement pace to avoid chasing highs in extreme markets. - Use futures tools for hedging to lock in future costs and hedge against price volatility. - Strengthen diversified procurement channels to reduce dependence on single import sources and enhance supply chain resilience.

For Foreign Trade Companies - Include price adjustment clauses in export contracts to prevent profit erosion from sharp raw material cost fluctuations. - Closely track port inventory and operating rate data to forecast price trends and optimize order timing and pricing strategies. - Establish strategic partnerships with upstream suppliers to secure long-term supply and ensure stable feedstock availability.