On December 23, Everest Group (EG) saw a significant decline, dropping 3.02% amid increased trading volume. The key factors driving this downturn are as follows:

1. **Rapid Inventory Accumulation and Weak Medium-Term Outlook**: Since October, EG inventories have surged, with main port stocks rising from 400,000 tons in late September to nearly 900,000 tons—an average monthly increase of around 200,000 tons. Downstream hidden inventories have also reached elevated levels. As port stocks rebound, market liquidity has improved. Additionally, new production capacity is adding pressure, with Ningxia Changyi's new facility recently commencing operations and BASF's 800,000-ton project in Zhanjiang set to start in January. Coupled with high import volumes in recent months, supply pressures are expected to drive inventory accumulation of approximately 500,000 tons in January-February, necessitating further production cuts to balance the market.

2. **Inadequate Production Cuts and Rising Operating Rates**: Despite low prices, EG production cuts have fallen short of expectations, with operating rates recently rebounding to over 70%. Restarts at facilities such as Zhengdakai (600,000 tons) and CNOOC Huizhou (400,000 tons) have contributed to this trend. Further restarts at Huayi and Yulin Chemical are planned, with limited maintenance shutdowns expected, potentially pushing January operating rates even higher.

3. **Polyester Filament Production Cuts**: Downstream weaving orders and operating rates are declining. Amid strong gains in PTA prices, polyester filament producers are facing deepening losses. Three major manufacturers have confirmed a 10% reduction in POY output starting this Wednesday, while FDY production cuts of 15% will continue, with coordinated supervision in place.

The primary issue for EG lies in supply-side pressures, with both domestic and international production at high levels and inventories accumulating rapidly. Further production cuts are needed to restore balance. Today’s sharp price drop raises the possibility of EG breaking below the December 11 low of 3,587 yuan/ton. However, a potential MACD divergence at these multi-year lows suggests caution is warranted. Investors should monitor EG production adjustments closely while managing positions carefully.

**Risk Warning**: Changes in cost dynamics, potential EG production cuts exceeding expectations.