Polyester Sector Varieties Rally

Since August 15, the entire domestic polyester sector has rebounded.Nanhua FuturesDai Yifan, Director of Energy Chemical, believes that the recent continuous rise in the polyester sector is caused by the resonance of multiple factors. Specifically, this week, both oil and coal prices on the cost side have stabilized and rebounded. Due to the long-term undervaluation of the polyester sector, prices no longer have room to fall sharply, providing strong support at the lower end. Meanwhile, inventories of raw materials in the polyester industry chain—PX, PTA, and MEG—are all at low levels. With the peak demand season approaching, if there is any unexpected positive news, prices are likely to show strong upward elasticity. Therefore, this week, ethylene glycol saw a substantial price increase driven by concerns over raw material supply, and PTA experienced a significant rise due to unplanned plant maintenance. The strong momentum of raw materials in the polyester industry chain has collectively strengthened the sector’s overall valuation.

According to Yang Sijia, a chemical product analyst at Xinhu Futures, the stabilization of crude oil prices at a critical level is the foundation for the polyester sector to stabilize and rise. From a supply and demand perspective, in mid-to-late August, the demand side is gradually transitioning between the off-peak and peak seasons, with the operating rate of end weaving rebounding from the bottom to 63%, and the operating rate of the polyester sector also rising to 89.4%. The demand support for upstream raw materials such as PTA and PX is strengthening. Before the "Golden September and Silver October" peak season arrives, there is significant restocking demand downstream of the industry chain, with concentrated purchasing actions from downstream weaving, leading to a smooth transfer of polyester inventory to downstream, and there are obvious signs of improvement in the demand side on a month-on-month basis. Additionally, there was an expectation of "anti-involution" policies in the domestic commodity market, but the polyester sector had been relatively flat. Recently, frequent supply-side disturbances have prompted prices to rise further.

"The overall capacity growth of the polyester industry chain is slowing down, entering a phase of orderly expansion. PX and short fiber production have been paused, ethylene glycol production is slowing down, while PTA and bottle-grade polyester maintain high-speed capacity growth. The different commissioning rhythms of upstream and downstream lead to the concentration of industry profits towards the upstream of the industry chain," said Dai Yifan. Currently, the overall profit of the entire industry chain remains at a low level. Given stable cost conditions, there is limited room for downward price movement.

Yang Sijia believes that the current polyester industry chain shows a pattern of "strong upstream, weak downstream." The upstream PX segment enjoys relatively good profits, while the midstream and downstream PTA and polyester segments have lower profits. In terms of operating rates, the PX segment has recovered to a high level, with a domestic operating rate of around 84% and an Asian operating rate of about 74%. The PTA segment’s operating rate is relatively neutral, at around 76%. Driven by the approaching peak season, operating rates for polyester and downstream weaving sectors have increased, and downstream consumption has entered a seasonally improving phase. However, there will still be pressure after October: on the one hand, the industry faces a seasonal decline in consumption; on the other, there are expectations of a certain weakening in exports.

"The current trading logic of the polyester industry chain remains a contradiction between strong reality and weak expectations. Although the spot market continues to maintain a tight liquidity situation, concerns about the 'rush to export' in the first half of this year depleting demand for the second half are difficult to invalidate in the short term, and the demand side continues to drag down the valuation of the polyester sector," said Dai Yifan. In the short term, the polyester sector remains in a pattern that is easy to rise and hard to fall.

In the long term, Dai Yifan stated that the upward trend in the polyester sector may be difficult to sustain, and for prices to continue strengthening, more unexpected positive factors from the cost side, supply and demand, and macroeconomic sentiment are needed.

Yang Sijia believes that before September, polyester prices are expected to show a relatively strong trend. After September, attention should be paid to changes in industry chain valuation, the strength of peak season demand, and the actual impact on the supply side.