Where to begin
The core outlook for PX and PTA remains neutral. Supply-side restart expectations are emerging, with multiple PX facilities restarting, including Liao Yang Petrochemical, CNPC Jinzhou Petrochemical, Zhejiang Petrochemical, and Weilian Chemical, totaling 6.4 million tons. PTA has seen significant load reductions in the short term due to extreme weather, hitting multi-year lows, but after the typhoon passes, load recovery and the restart of previously idled units will lead to a substantial increase in supply. On the demand side, downstream orders remain low during the off-season, with attention on late August order conditions. Downstream buyers are adopting a just-in-time purchasing strategy, keeping production and sales at low levels. The primary contradiction lies in the pace of supply recovery. With supply increasing and demand persistently low, the fundamentals for both PX and PTA are expected to weaken marginally.
Key strategies
The US-Iran nuclear talks are deadlocked, geopolitical risks are rising again, and PX and PTA prices are following crude oil in a volatile and slightly stronger trend. However, their fundamentals are expected to weaken marginally, limiting upward momentum and compressing the spread compared to crude oil. PTA processing margins are weakening, and the reverse arbitrage in monthly spreads has already materialized. PX monthly spreads and PXN remain elevated, presenting opportunities to capitalize on the reverse arbitrage in monthly spreads and the narrowing of PXN as PX restarts.
Valuation: Neutral
PXN is at a high level, while PTA processing margins and polyester product profits have declined. With crude oil prices strengthening, the polyester chain's valuation is compressing, with profits concentrated in the upstream.
Cost: Slightly bullish
The gap between US-Iran negotiations and market expectations is significant, restoring geopolitical risk premiums and pushing oil prices higher in the short term. In the medium to long term, WTI oil is expected to trade in a wide range of $70-90 per barrel, with downward pressure from the US midterm elections and upward support from refinery restocking and SPR replenishment during the peak season.
Supply: Slightly bearish
PX: Liao Yang Petrochemical's 700,000-ton unit is restarting. CNPC Jinzhou Petrochemical's 1.6 million-ton unit and Zhejiang Petrochemical's second-phase 2.5 million-ton unit are in the restart process. Fu Hua's 1.6 million-ton unit is expected to restart in mid-to-late August. Weilian Chemical is also restarting. Overseas facilities have seen little change this week. PTA: Yi Sheng Da Hua's 3.75 million-ton unit and Du Shan's 2.5 million-ton unit are undergoing scheduled maintenance. Yi Hua's 3 million-ton unit, Du Shan's 8.7 million-ton unit, and Jia Tong's 6 million-ton unit are reducing loads. Hengli Huizhou recently experienced a short-term shutdown.
Demand: Slightly bearish
This week, two polyester units (totaling 650,000 tons) are undergoing maintenance, while one unit (200,000 tons) is restarting. Load adjustments on other units have led to an overall decline in polyester loads. End-user purchasing willingness remains weak.
Supply-demand balance: Slightly bearish
After extreme weather subsides, PX and PTA unit loads are expected to increase. Polyester operations are likely to remain largely unchanged, with loads at relatively low levels, leading to a marginal weakening of fundamentals.
MEG core outlook: Slightly bearish
US-Iran negotiations are stalling, with Iran taking a tough stance, creating uncertainty about navigation through the Strait of Hormuz, though MEG fundamentals remain tight. Domestically, many units are under maintenance, but with improving margins, there is an expectation of increased loads for both oil-based and coal-based units. Oil-based units are already showing signs of load increases. On the demand side, downstream orders remain low during the off-season, with attention on late August order conditions. Downstream buyers are adopting a just-in-time purchasing strategy, keeping production and sales at low levels.
Strategy
Navigation through the Strait of Hormuz significantly impacts MEG imports, with prices following crude oil in a volatile, slightly stronger trend. Before the strait opens, near-month contracts are approaching delivery, with a tight spot market and low downstream profit margins resisting high-priced raw materials. For contracts expiring after September, monthly spreads continue to follow a forward arbitrage logic.
Valuation: Slightly bearish
Naphtha prices are weak while MEG prices are strong, leading to a sharp rebound in naphtha-based production profits and maintaining high coal-based profits.
Supply: Slightly bullish
As of August 7, the overall MEG operating rate in mainland China was 53.37%, up 0.69% week-on-week. Among this, the ethylene-based capacity utilization rate was 49.66%, up 1.77%, while the non-ethylene-based MEG operating rate was 56.72%, down 1.18% week-on-week.
Imports and exports: Bullish
The blockade of the Strait of Hormuz continues, delaying the recovery of Middle Eastern MEG imports. Additionally, due to a MEG supply gap abroad, domestic MEG exports are increasing, leading to a significant year-on-year decline in net imports.
Demand: Slightly bearish
This week, two polyester units started up, while Gu Xian Dao's 900,000-ton unit underwent maintenance due to circuit renovations, resulting in a slight reduction in polyester loads. End-user purchasing willingness remains weak.
Supply-demand balance: Bullish
The US-Iran situation is heating up, with Iran taking a tough stance, reversing expectations for Strait of Hormuz navigation, and maintaining a tight MEG fundamental landscape.
PTA price review
MEG price review
01. Prices, spreads, and margins
The PX September-January spread is weakening with volatility. The gap between US-Iran negotiations and market expectations is significant, restoring geopolitical risk premiums and pushing oil prices higher in the short term. In the medium to long term, WTI oil is expected to trade in a wide range of $70-90 per barrel, with downward pressure from the US midterm elections and upward support from refinery restocking and SPR replenishment during the peak season.
Naphtha prices are following crude oil weaker, with the Japan CFR mid-price at $761.3 per ton, down $75.3 per ton week-on-week, a decline of 9%. PX CFR Taiwan stands at $1,084.3 per ton, up $6.3 per ton week-on-week, an increase of 0.6%.
PXN and short-process margins are sharply strengthening
The latest PXN is $323.1 per ton, up $81.6 per ton week-on-week. The PX-MX spread has recovered significantly, with PX short-process production profit at $141.3 per ton, up $15.3 per ton week-on-week.
US-European-Asian gasoline crack spreads are declining from highs
Asian naphtha crack spreads are falling, and chemical-type reforming profits are improving. The decline in naphtha crack spreads is partly due to Kuwait Petroleum Company resuming cargo transport services and increasing passage through the strait, raising expectations of a return. Demand is also being suppressed, as some Southeast Asian companies have shifted to using more cost-effective LPG as a substitute for naphtha due to high oil prices.
The economics of blending xylene and toluene are weakening
PTA basis and monthly spreads strengthen, spot processing margins bottom and recover
Early in the week, the spot basis negotiation range moved from 09+155~185 to 09+190~230. By mid-week, the spot transaction center shifted to the 09+210~230 range. By Friday, spot market negotiations had cooled, with the basis trading in a wide range of 09+225~270. In Zhejiang, it was at the lower end. Warehouse receipts traded at 09+180~200 this week. This week, PTA processing margins improved, with a weekly average of 493 yuan per ton. On August 10, the main PTA futures contract closed at 5,672 yuan per ton, down 182 yuan per ton week-on-week, a decline of 3.11%.
MEG basis and September-January spreads both strengthen
This week, MEG domestic prices fluctuated widely at high levels, with the spot basis continuing to strengthen. In the first half of the week, oil prices fell sharply, and MEG futures corrected, following Trump's claim of starting US-Iran talks and news of the Strait's opening. However, MEG spot liquidity was tight, coupled with rare arrivals of near-term foreign cargoes and port closures, leading to active replenishment by contract holders and a strengthening spot basis. In the second half of the week, the Hormuz agreement was continuously delayed, raising risks of escalation in the Middle East, leading to a rebound in MEG futures and active market trading. By Friday, MEG spot prices had risen to 5,310-5,315 yuan per ton, with the spot basis strengthening to a premium of 480-500 yuan per ton over the 09 contract. On August 10, the main MEG futures contract closed at 4,787 yuan per ton, down 137 yuan per ton week-on-week, a decline of 2.78%.
Polyester product profits are all declining
02. Supply and demand
Polyester production growth rate in 2026 is higher than in 2025
In 2026, new polyester capacity is substantial, with an estimated 5.47 million tons of production, a growth rate of 6.14%, higher than in 2025. In terms of product categories, due to significant capacity additions for bottle-grade chips in 2024 and 2025 and persistently low profits, there are few new planned bottle-grade chip units in 2026, with only 700,000 tons from two units at Fu Hai and Ke Sen New Materials. In contrast, filament yarn, which had low capacity additions in the previous two years, has seen a significant improvement in profits, becoming the main driver of capacity additions in 2026. In the first quarter, two units started production, totaling 800,000 tons. In April-May, there were 1.01 million tons, mainly involving filament yarn, chips, and bottle-grade chips. With continuous improvement in bottle-grade chip profits, two units from Han Jiang and An Hua are expected to start production.
Polyester loads are declining
Polyester loads have slightly declined. As of August 7, the polyester load was 78.77% (-0.92%), with filament yarn at 74.28% (+0.4%), staple fiber at 75.65% (+0%), and bottle-grade chips at 74.44% (-0.09%).
January-June polyester net exports were 7.4108 million tons, up 3.1% year-on-year
From January to June, cumulative polyester exports were 6.207 million tons, up 3.1% year-on-year. Among this, cumulative bottle-grade chip exports were 3.208 million tons, down 1.1% year-on-year. Cumulative filament yarn exports were 2.155 million tons, up 1.9% year-on-year. Cumulative staple fiber exports were 847,000 tons, up 4.7% year-on-year.
Polyester products are slightly accumulating inventory
Staple fiber equity inventory days were 8.24 days (+0.7 days). DTY was 33.8 days (+3.2 days), FDY was 32 days (+1.6 days), and POY was 26.7 days (+0.2 days). Polyester chips were 3.93 days (-0.59 days), and polyester bottle-grade chips were 9.31 days (+0.51 days).
Staple fiber sales rates have dropped sharply, filament yarn sales rates have slightly recovered
The five-day average sales rate for staple fiber was 54.3%, down 17.1% week-on-week. The five-day average sales rate for filament yarn was 46.8%, up 7.8% week-on-week. The five-day average sales rate for chips was 42.9%, down 3.5% week-on-week.
Finished product inventory days are increasing, raw material (polyester yarn) procurement days are decreasing
As of August 6, the average inventory of finished fabrics (long-fiber cloth) at end-use textile mills was 18.73 days, an increase of 0.25 days from the previous week. Due to geopolitical risks, foreign buyers are not willing to place concentrated orders, and autumn-winter orders are generally below expectations. Recent market sales show no significant improvement, with a generally cold atmosphere. Continuous high temperatures have exacerbated production difficulties, leading to continuous accumulation of fabric inventories. As of August 6, the average inventory of raw materials (polyester yarn) at end-use textile mills was about 7.71 days, down 0.71 days from the previous week. Geopolitical instability has led to significant fluctuations in raw material prices, increasing foreign buyer caution and resulting in a light trading atmosphere. With high fabric inventory levels, high temperatures, and weak market demand, many mills are reducing loads, and their enthusiasm for raw material procurement is insufficient, maintaining a buy-as-needed approach.
Downstream orders are generally weak
As of August 6, operating rates for warp knitting, air-jet, water-jet, circular knitting, and printing/dyeing were 46.2% (0%), 52.3% (-0.17%), 54.2% (-2.37%), 34.4% (-1.4%), and 49% (-0.37%), respectively. As of August 6, the average order days for end-use textile mills was 5.88 days, down 0.26 days from the previous week. The textile and apparel off-season is deepening, with few new or large orders, only small lots and sporadic orders, showing poor order continuity. Large foreign trade mills rely on winter fabric orders, with production scheduling extending to around September, but most are currently in a cautious wait-and-see mode. Domestic brands, market orders, and e-commerce orders have a small number of summer replenishment orders, but autumn-winter orders are also in a wait-and-see state.
PX production in 2026 is concentrated in the second half of the year
In 2026, domestic units waiting to be commissioned total 3.97 million tons, with a production growth rate of 9.1%. This includes Fu Jia Da Hua's expansion of 300,000 tons, Hua Jin's 2 million tons, and Jiu Jiang Petrochemical's 1.5 million tons (which may be delayed). In terms of timing, Fu Jia Da Hua's expansion is expected to produce at the beginning of the year. Jin Ling Petrochemical will restart at the end of May, expanding capacity by 170,000 tons to 870,000 tons. Hua Jin is expected to start in the third quarter of 2026, while Jiu Jiang Petrochemical will not be commissioned until the fourth quarter. Therefore, the supply pressure for PX is mainly in the fourth quarter. Shan Dong Yu Long Petrochemical's 3 million tons can only produce MX and has not yet obtained a PX production license, likely delaying it to 2027. Overseas, there are few new PX units in 2026, with only Indian Oil Corporation's 800,000-ton unit starting in the second half of 2026, mainly to supply raw materials for downstream PTA units.
China's PX load and overseas load are recovering
Domestic units: Liao Yang Petrochemical's 700,000-ton unit is restarting. CNPC Jinzhou Petrochemical's 1.6 million-ton unit and Zhejiang Petrochemical's second-phase 2.5 million-ton unit are in the restart process. Fu Hua's 1.6 million-ton unit is expected to restart in mid-to-late August. Weilian Chemical is also restarting. Overseas units: There has been little change this week.
China's PX load and overseas load are slightly recovering
The domestic PX unit operating rate is currently 62.88%, up 0.3% week-on-week. The Asian PX unit operating rate is 59.76%, up 0.12% week-on-week. Domestic PX production in July was 2.378 million tons, down 17.9% month-on-month and 25.4% year-on-year.
Para-xylene imports in June were up 0.02% month-on-month and down 37% year-on-year
From January to June 2026, China's cumulative PX imports were 4.502 million tons, up 0.02% year-on-year. In June, imports were 482,000 tons, up 0.04% month-on-month and down 37% year-on-year.
No new PTA units in 2026
Due to units from Luo Yang Petrochemical (325,000 tons), Yi Hua (350,000 tons), Ya Dong (750,000 tons), and San Fang Xiang Phase 2 (1.2 million tons), totaling 2.625 million tons, having been shut down for over two years with no current recovery expectations, they will be removed by year-end. From January 1, 2026, the PTA capacity base in mainland China has been adjusted to 92.09 million tons. In 2026, there are no new PTA units, easing capacity pressure.
PTA production in July was down 9.9% month-on-month and 21.1% year-on-year
From January to July 2026, cumulative PTA production was 40.809 million tons, down 2.9% year-on-year. In July, domestic PTA production was 4.97 million tons, down 548,000 tons month-on-month, a decline of 9.9%, and down 1.333 million tons year-on-year, a decline of 21.1%.
PTA exports in June were up 9.8% month-on-month and 40.3% year-on-year
From January to June 2026, cumulative PTA exports were 1.891 million tons, up 1.8% year-on-year. In June, PTA exports were 358,000 tons, up 9.8% month-on-month and 40.3% year-on-year.
Multiple units shut down or reduce loads, domestic PTA load drops sharply
Yi Sheng Da Hua's 3.75 million-ton unit and Du Shan's 2.5 million-ton unit are undergoing scheduled maintenance. Yi Hua's 3 million-ton unit, Du Shan's 8.7 million-ton unit, and Jia Tong's 6 million-ton unit are reducing loads. Hengli Huizhou recently experienced a short-term shutdown. The PTA load is 48.39%, down 6.87% week-on-week.
PTA warehouse receipt volumes are declining from highs
PTA social inventory continues to decrease significantly
PTA social inventory is significantly destocking. According to the latest inventory data from Zhongpu, as of July 31, PTA social inventory continued to decline sharply, down 15.9 tons week-on-week to 1.837 million tons. Among this, warehouse receipts were down 79,000 tons, in-warehouse and in-port inventory was down 110,000 tons, PTA plant inventory was up 6,500 tons, and polyester plant inventory was up 14,000 tons.
MEG production is concentrated in the fourth quarter, with a high growth rate
In 2026, there are a total of four units to be commissioned, mainly oil-based, totaling 2.75 million tons, with the MEG production growth rate in 2026 recovering to 9.2%. BASF has already started production at the beginning of 2026, while the other three units are all scheduled for the fourth quarter, with the second and third quarters being a window without new production.
MEG production in July was down 1.8% month-on-month and 4.5% year-on-year
From January to July 2026, cumulative MEG production was 11.478 million tons, up 0.78% year-on-year. In July, MEG production was 1.522 million tons, down 28,000 tons month-on-month, a decline of 1.8%, and down 71,000 tons year-on-year, a decline of 4.5%.
MEG coal-based maintenance increases, non-ethylene-based operating rate continues to decline
As of August 7, the overall MEG operating rate in mainland China was 53.37%, up 0.69% week-on-week. Among this, the ethylene-based capacity utilization rate was 49.66%, up 1.77%, while the non-ethylene-based MEG operating rate was 56.72%, down 1.18% week-on-week. For ethylene-based units, Gu Lei Petrochemical's 700,000-ton unit is restarting. Yuan Dong Lian's 500,000-ton unit is expected to restart in mid-August. Zhejiang Petrochemical's Phase 1 and Phase 2 loads are slightly increasing. Sheng Hong Refining's 900,000-ton unit is expected to restart in mid-August. For non-ethylene-based units, Xinjiang Tianye's Phase 3 600,000-ton unit, originally planned for maintenance in August for one month, has been postponed. Yangmei Shouyang's 200,000-ton unit was shut down for maintenance in mid-July for about three weeks. Hong Sifang's 300,000-ton unit is increasing its load. Tianying's 150,000-ton unit has completed technical upgrades and is restarting. Woneng's 300,000-ton unit is shut down for maintenance from early August to August 20. Meijin's 300,000-ton unit is producing in early August. Zhong Chemical's 300,000-ton unit is restarting. Zheng Da Kai's 600,000-ton unit is shut down for maintenance from late July for about 40 days.
Naphtha prices are weak while MEG prices are strong, leading to a sharp rebound in naphtha-based production profits and maintaining high coal-based profits.
January-June MEG imports were down 80.1% year-on-year, exports up
From January to June 2026, China's total MEG imports were 2.58 million tons, down 32.9% year-on-year. In June, MEG imports were 123,000 tons, down 38.5% month-on-month and 80.1% year-on-year. From January to June 2026, China's total MEG exports were 339,000 tons, up 368.9% year-on-year. In June, MEG exports were 98,000 tons, up 13.2% month-on-month and 1,019.8% year-on-year.
MEG port inventory slightly declines
On July 31, MEG port inventory in the East China main port area was 416,000 tons, down 28,000 tons week-on-week. Expected arrivals have dropped sharply to 39,000 tons. Meanwhile, outbound volumes have declined from highs.
MEG plant inventory increases sharply, polyester plant inventory days continue to decline
As of July 31, the raw material inventory days for polyester plants (MEG) was 12.1 days (down 0.7 days from the previous week). MEG plant inventory in June was 480,000 tons, up 30,000 tons month-on-month and up 171,000 tons year-on-year.
03. Supply-demand balance estimation
PX monthly supply-demand balance estimate
Entering the second quarter, due to limited crude oil supply, PX units followed refineries in reducing loads, but the overall decline was not significant, with load levels relatively high year-on-year. Downstream PTA entered a concentrated maintenance season in April, along with raw material shortages at some plants, causing PTA loads to drop to multi-year lows, marginally loosening PX fundamentals. In June and July, with maintenance at several large units like Sheng Hong and Weilian Chemical, loads will enter a low point for the year, further tightening the PX supply-demand balance. In the fourth quarter, with the commissioning of new units and the arrival of the downstream off-season, PX will begin to accumulate inventory.
PTA monthly supply-demand balance estimate
In the second quarter, PTA units experienced seasonal maintenance due to insufficient raw material PX supply, leading to a significant drop in production and operating rates, a situation expected to continue until July. Exports declined year-on-year due to new overseas units, and fundamentals saw significant destocking in May-June-July, with the destocking rate narrowing in August. In the fourth quarter, with the recovery of supply and the arrival of the off-season, fundamentals will begin to shift to inventory accumulation.
MEG monthly supply-demand balance estimate
Entering the third quarter, due to ongoing uncertainty in the US-Iran situation and the unknown status of navigation through the Strait of Hormuz, imports remain at low levels. Domestically, maintenance for non-ethylene-based MEG in China is increasing, and with declining profits, loads are falling from highs. Overall, the production increase month-on-month in the second quarter is limited. Assuming navigation through the Strait of Hormuz resumes in August, imports will slowly increase in September, and downstream polyester units will also increase loads and replenish inventory, maintaining a destocking state in fundamentals for the third quarter.
Xu Anjing, License No.: F03134529, Investment Consulting No.: Z0022195, Contact: xuaj@ddqh