Key Insights from Dadi Futures Research Institute
PX/PTA Core View: Bullish
Multiple PX and PTA units have plans to restart in August, leading to a marginal increase in supply. On the demand side, order volumes are low during the off-season. Over the weekend, the US and Iran halted military strikes, temporarily easing Middle East tensions. This has caused a pullback in cost prices as geopolitical premiums unwind. Downstream buyers of staple fiber and filament yarn, driven by a "buy on rising, not falling" sentiment, have seen their purchasing enthusiasm wane, with production and sales remaining low. Before the peak season arrives, the likelihood of a concentrated inventory restocking by end-users is small, making it difficult for demand to become the main driver of market contradictions. The current market focus is on rising refinery operating rates and supply recovery, leading to a weakening of the PX and PTA September-January calendar spreads. However, the long-term instability in the Middle East remains, as the blockades of the Bab el-Mandeb and Strait of Hormuz are still not lifted, continuing to pose a risk to supply.
Strategy: Favor a Bullish Approach After Pullbacks
Follow crude oil's correction on a single-leg basis. The polyester chain's valuations are low, so a bullish approach is favored after pullbacks. With unit restarts in August, the PX and PTA calendar spreads are following a bearish spread logic. However, as the dual strait blockade persists, market attention will shift back to the uncertainty of Middle Eastern raw material supply. Additionally, tight refined product supply will also squeeze chemical feedstock supply through blending economics.
Valuation: Bullish
The PXN spread has bottomed and recovered, PTA processing fees are weakening, and polyester product profits are recovering. As crude oil prices have fallen, valuations across the polyester chain have seen some repair.
Cost: Neutral
Over the weekend, the US government ordered a halt to military strikes against Iran, and Iran suspended retaliatory actions. This has reduced geopolitical premiums, dragging oil prices lower from highs. Despite a temporary military lull, actual supply pressure has not eased. Transit volumes through the Strait of Hormuz remain extremely low, and Houthi military actions have caused a sharp drop in traffic through the Bab el-Mandeb Strait. Monitor US-Iran negotiations. In the medium to long term, focus on the support from refinery restocking and SPR replenishment during the peak season.
Supply: Bearish
PX: Domestically, Liaoyang Petrochemical’s 700,000-ton unit has a one-week maintenance plan for late July. Zhongjin Petrochemical’s 1.6 million-ton unit may restart in late July to early August. Overseas units have seen little change. Domestically, Fuhai Chuang and Weilian Chemical are scheduled to restart in late July as planned, while Shenghong has a plan for an early restart.
PTA: This week, Zhongtai Petrochemical’s 1.2 million-ton unit is restarting. Monitor the restarts of Sichuan Nengtou and Fuhai Chuang.
Demand: Neutral
Polyester operating rates are expected to adjust slightly in the short term. Xinjiang Tunhe has a 100,000-ton unit under maintenance. Fuhai is starting up a 300,000-ton unit in late July. Geopolitical risks remain uncertain recently. With raw material prices falling, downstream buyers of staple fiber and filament yarn have reduced their purchasing willingness.
Supply-Demand Balance: Neutral
PX and PTA unit operating rates are expected to increase, while polyester operating rates are likely to remain stable. With improved supply expectations, the fundamental picture is marginally weakening. In the medium to long term, monitor the impact of the Strait of Hormuz shutdown on raw material supply for the polyester chain.
MEG Core View: Neutral
The ongoing blockade of the Strait of Hormuz means no recovery in imports is yet visible, delaying the timeline for import recovery. Meanwhile, exports have increased significantly year-on-year, leading to a sharp decline in net MEG imports. Domestically, unit maintenance keeps overall supply at low levels. On the demand side, order volumes are low during the off-season. Over the weekend, the US and Iran halted military strikes, temporarily easing Middle East tensions. This has caused a pullback in cost prices as geopolitical premiums unwind. Downstream buyers of staple fiber and filament yarn, driven by a "buy on rising, not falling" sentiment, have seen their purchasing enthusiasm wane, with production and sales remaining low. Before the peak season arrives, the likelihood of a concentrated inventory restocking by end-users is small. The contradiction for MEG is prominent in the near term, while in the distant future (Q4), there is significant new MEG capacity coming online, pressuring the January contract. This creates a pattern of strength in the near term and weakness in the distant term, sustaining the bull spread driver.
Strategy: Cautious on Distant Contracts, Favor Longs on Dips Long-Term
With a temporary easing of Middle East geopolitical tensions, take short positions on distant month contracts. In the medium to long term, if there are no signs of navigation through the straits, favor a strategy of buying on dips.
Valuation: Bearish
Falling refined product prices have dragged MEG prices lower. Naphtha-based production margins have rebounded, while coal-based margins have slipped slightly.
Supply: Bullish
As of July 24, the overall operating rate for MEG in mainland China was 53.32%, down 0.4% week-on-week. Ethylene-based capacity utilization was 50.54%, down 0.34% week-on-week. Non-ethylene-based MEG operating rates were 58.11%, down 0.51% week-on-week.
Imports: Bullish
The blockade of the Strait of Hormuz persists, delaying the recovery of Middle Eastern MEG import volumes. Furthermore, there is a MEG supply gap abroad, leading to increased MEG exports from China. Net imports have fallen sharply year-on-year.
Demand: Neutral
Polyester operating rates are expected to adjust slightly in the short term. Xinjiang Tunhe has a 100,000-ton unit under maintenance. Fuhai is starting up a 300,000-ton unit in late July. Geopolitical risks remain uncertain recently. With raw material prices falling, downstream buyers of staple fiber and filament yarn have reduced their purchasing willingness.
Supply-Demand Balance: Bullish
The US-Iran situation has temporarily eased, but there are still no signs of navigation through the Bab el-Mandeb and Strait of Hormuz. Import recovery is delayed. MEG is expected to significantly reduce inventories in Q3. Fundamentals continue to tighten due to extremely low net imports.
PTA Price Review
MEG Price Review
01. Prices, Spreads, and Margins
The PX September-January spread is bottoming out and oscillating. Over the weekend, the US government ordered a halt to military strikes against Iran, and Iran suspended retaliatory actions. This has reduced geopolitical premiums, dragging oil prices lower from highs. Despite a temporary military lull, actual supply pressure has not eased. Transit volumes through the Strait of Hormuz remain extremely low, and Houthi military actions have caused a sharp drop in traffic through the Bab el-Mandeb Strait. Monitor US-Iran negotiations. In the medium to long term, focus on the support from refinery restocking and SPR replenishment during the peak season. Naphtha prices followed crude oil lower, with the Japan CFR mid-price at $847.5/ton, up $7.8/ton week-on-week (+0.92%). PX CFR Taiwan was $1061/ton, down $23.7/ton week-on-week (-2.2%).
PXN and Short-Process Margins Continue to Weaken
The latest PXN spread is $213.5/ton, down $31.4/ton week-on-week. The PX-MX spread has fallen sharply further. The short-process production margin for PX is $83/ton, down $27.3/ton week-on-week.
Gasoline Cracks in US, Europe, and Asia Recover Sharply
Asian naphtha cracks are recovering, with better margins for gasoline-type reforming. The Asian naphtha market was dominated by Middle Eastern geopolitical risks this week. The blocked navigation through the Strait of Hormuz, and potential blockage of the Red Sea route, has led to a significant supply gap, compounded by reduced Russian exports, heightening concerns about tight supply. For gasoline, the Russian shortage combined with robust Northern Hemisphere summer peak season demand supports the market. During the peak gasoline consumption season, the margin for blending naphtha into gasoline has marginally improved relative to aromatics-type reforming. The economics for blending xylene and toluene into gasoline have strengthened significantly.
PTA Basis and Monthly Spread Weaken, Spot Processing Margins Fall from Highs
This week, the PTA spot basis weakened rapidly. At the start of the week, the spot basis negotiation range dropped from 09+180~195 to 09+180~185, and then quickly lowered to 09+115~150 for transactions. Warehouse receipts were traded at 09+105~130 this week. Mid-week, PX prices rose significantly, but PTA's follow-up gains were limited, heavily compressing the PTA processing spread, which touched a low of 297 yuan/ton, averaging 404 yuan/ton for the week. On July 27, the PTA futures main contract closed at 5624 yuan/ton, down 266 yuan/ton week-on-week (-4.52%).
MEG Basis and Sep-Jan Monthly Spread Both Strengthened
In the first half of the week, MEG prices moved sharply higher, with decent buying interest. Spot prices traded as high as 4830-4840 yuan/ton, and the spot basis strengthened simultaneously. In the second half of the week, MEG prices fluctuated wildly at highs, with some holders increasing sales. Buying interest for distant futures picked up. By Friday, August-delivery futures were traded at a premium of 160-165 yuan/ton over the 09 contract. On July 22, the MEG futures main contract closed at 4776 yuan/ton, up 126 yuan/ton week-on-week (+2.71%).
Polyester Product Margins All Declined
02. Supply and Demand Inventory
Polyester Investment Growth in 2026 Higher Than 2025
There is significant new polyester capacity planned for 2026, with an estimated total investment of 5.47 million tons, representing a growth rate of 6.14%, higher than in 2025. Looking at the product categories, due to the large number of bottle-grade chip units started up in 2024 and 2025, leading to persistently low margins, there are few new bottle-grade chip projects planned for 2026, totaling only 700,000 tons from two units (Fuhai 300,000 tons and Kesen New Materials 400,000 tons). In contrast, filament yarn investment was low in the previous two years, its margins have improved significantly, making it the main focus of new investment in 2026. In Q1, two units totaling 800,000 tons are scheduled to start up. In April-May, a total of 1.01 million tons of capacity is planned, mainly involving filament yarn, chips, and bottle-grade chips. With bottle-grade chip margins continuing to improve, there is an expectation for two bottle-grade units (Hanjian and Anhua) to start up.
Polyester Operating Rates Stable
Polyester operating rates saw a slight increase. As of July 24, the polyester operating rate was 79.99% (-0.06%), with filament yarn at 74.29% (-0.1%), staple fiber at 75.65% (-0.06%), and bottle-grade chips at 74.91% (+0%). Source: CCF, Dadi Futures Research Institute.
Jan-Jun Polyester Net Exports: 7.4108 Million Tons, +3.1% YoY
From January to June, cumulative polyester exports were 6.207 million tons, up 3.1% year-on-year. Bottle-grade chip exports accumulated 3.208 million tons, down 1.1% YoY. Filament yarn exports accumulated 2.155 million tons, up 1.9% YoY. Staple fiber exports accumulated 847,000 tons, up 4.7% YoY.
Polyester Products All Destocking
Staple fiber rights inventory days were 7.33 days (-0.47 days). DTY was 30.8 days (-2.2 days), FDY was 29.2 days (-1.1 days), and POY was 25 days (-0.9 days). Polyester chips were 4.7 days (-1.33 days), and polyester bottle-grade chips were 8.78 days (-0.35 days).
Staple Fiber and Filament Yarn Sales Ratios Increased MoM
The five-day average sales ratio for staple fiber was 62.7%, down 3% week-on-week. The five-day average sales ratio for filament yarn was 41.5%, down 1.7% week-on-week. The five-day average sales ratio for chips was 59.5%, up 15.2% week-on-week.
Finished Product Inventory Days Increased, Raw Material (Polyester Yarn) Stocking Days Decreased
As of July 23, the average finished product inventory level for end-use weaving (long-fiber fabric) was 18.02 days, an increase of 0.41 days from the previous week. Some manufacturers, due to insufficient orders, chose to produce conventional varieties like micro-suede flat fleece and plain weave for inventory. Demand for conventional grey fabrics was weak, with quiet transactions. Companies faced insufficient orders, leading to cautious purchasing attitudes downstream. Grey fabric inventories gradually accumulated, and the market is in a deep off-season. As of July 23, the average raw material (polyester yarn) inventory level for end-use weaving enterprises was around 10.70 days, down 0.07 days from the previous week. The geopolitical crisis remains unresolved, causing wide fluctuations in raw yarn prices. Weaving factories made small, concentrated replenishments, but without substantial improvement downstream, they mainly operated to maintain current run rates. Manufacturers' purchasing enthusiasm was low, as was production enthusiasm. Some small-scale enterprises reduced operating rates to hedge risk, leading to a slight decline in average raw material inventory levels compared to the previous week.
Downstream Order Intake Weak
As of July 23, operating rates for warp knitting, air-jet, water-jet, circular knitting, and printing/dyeing were 46.2% (0%), 52.7% (-0.5%), 58.02% (-0.77%), 35.74% (-0.46%), and 49.32% (-1.37%), respectively. As of July 23, the average order days for end-use weaving was 7.16 days, down 0.61 days from the previous week. Affected by high temperatures, consumption downgrading, and the off-season, the textile and apparel off-season is deepening, with orders scarce. Currently, inquiries and sampling for autumn/winter fabrics are gradually increasing. Some leftover orders for summer cool-feel functional fabrics are still pending delivery. However, with significant raw material price fluctuations, there is a large divergence in price negotiations between upstream and downstream, making both parties cautious about taking and placing orders.
PX Investment in 2026 Concentrated in H2
In 2026, a total of 3.97 million tons of domestic capacity is expected to start up, a growth rate of 9.1%. This includes Fuhua Dacheng's 300,000-ton expansion, Huajin's 2 million tons, and Jiujiang Petrochemical's 1.5 million tons (which may be delayed). Looking at the timeline, Fuhua Dacheng's expansion is expected to start production in early 2026. Jinling Petrochemical's restart in late May will expand its capacity by 170,000 tons to 870,000 tons. Huajin is expected to come online in Q3 2026, and Jiujiang Petrochemical will not be operational until Q4. Therefore, for the full year, PX supply pressure is mainly concentrated in Q4. Shandong Yulong Petrochemical's 3 million-ton unit can only produce MX and has not yet obtained the production license for PX, with its start-up expected to be delayed to 2027. Overseas, there are few new PX units in 2026, with only IOC's 800,000-ton unit planned for H2 2026, primarily to supply feedstock for its downstream PTA unit.
China PX Operating Rates and Overseas Operating Rates Stable
Domestic units: Liaoyang Petrochemical’s 700,000-ton unit has a one-week maintenance plan for late July. Zhongjin Petrochemical’s 1.6 million-ton unit may restart in late July to early August. Overseas units: Lotte's 500,000-ton unit restarted in mid-July. The current domestic PX operating rate is 62.58%, unchanged week-on-week. The Asian PX operating rate is 59.64%, down 0.08% week-on-week. Domestic PX production in June was 2.897 million tons, down 2.1% month-on-month and down 10.2% year-on-year. June PX imports were up 0.02% MoM, down 37% YoY. From January to June 2026, China's cumulative PX imports were 4.502 million tons, up 0.02% YoY. June imports were 482,000 tons, up 0.04% MoM, down 37% YoY.
No New PTA Units in 2026
Due to the shutdown of Luoyang Petrochemical (325,000 tons), Yizheng Chemical (350,000 tons), Yadong (750,000 tons), and Sanfangxiang Phase 2 (1.2 million tons), totaling 2.625 million tons of capacity which has been idle for over two years with no current recovery expectation, these are excluded from the base as of the end of the year. Starting January 1, 2026, the PTA capacity base in mainland China was adjusted to 92.09 million tons. In 2026, there are no new PTA units planned for start-up, easing the pressure from new capacity.
PTA June Production: +3.8% MoM, -12.3% YoY
From January to June 2026, PTA production was 35.839 million tons, a cumulative increase of 0.3% YoY. June domestic PTA production was 5.518 million tons, up 200,000 tons month-on-month (+3.8%), and down 771,000 tons year-on-year (-12.3%).
PTA June Exports: +9.8% MoM, +40.3% YoY
From January to June 2026, PTA exports were 1.891 million tons, up 1.8% YoY. June PTA exports were 358,000 tons, up 9.8% MoM and 40.3% YoY.
Domestic PTA Operating Rate Recovering from Lows
This week, Zhongtai Petrochemical’s 1.2 million-ton unit is restarting. The PTA operating rate is 61.96%, up 6.67% week-on-week. PTA warehouse receipts are declining from highs.
Total PTA Social Inventory Continues to Decrease Significantly
Total PTA social inventory saw a significant drawdown. According to the latest Zhongpu inventory data, as of July 24, total PTA social inventory continued to decline sharply, down 143,000 tons week-on-week to 1.996 million tons. This included a 53,000-ton decrease in warehouse receipts, an 110,000-ton decrease in in-warehouse and in-port inventory, a 6,500-ton increase in PTA plant inventory, and a 14,000-ton increase in polyester plant inventory.
MEG Investment Concentrated in Q4, High Growth Rate
In 2026, a total of four units are scheduled to start up, mainly oil-based, totaling 2.75 million tons. The MEG investment growth rate in 2026 recovers to 9.2%. BASF's unit started up in early 2026. The other three units are scheduled for Q4, leaving Q2 and Q3 as a period with no new capacity.
MEG June Production: -8.6% MoM, +1.5% YoY
From January to June 2026, MEG production was 9.956 million tons, up 2.2% YoY. June MEG production was 1.55 million tons, down 146,000 tons month-on-month (-8.6%), and up 23,000 tons year-on-year (+1.5%).
Increased Coal-to-MEG Maintenance, Non-Ethylene-Based Operating Rates Fall Sharply
As of July 24, the overall operating rate for MEG in mainland China was 53.32%, down 0.4% week-on-week. Ethylene-based capacity utilization was 50.54%, down 0.34% week-on-week. Non-ethylene-based MEG operating rates were 58.11%, down 0.51% week-on-week. For ethylene-based units, Sinopec Wuhan's 280,000-ton unit is running at low load, and Gulei Petrochemical's 700,000-ton unit is restarting. Far Eastern Union's 500,000-ton unit is increasing load. Hengli's 900,000-ton line is under maintenance this week for one month. Loads at Zhejiang Petrochemical Phase 1 and 2 have decreased slightly. For non-ethylene-based units, Xinjiang Tianye Phase 3's 600,000-ton unit plans a one-month maintenance shutdown in August. Yangquan Shouyang's 200,000-ton unit shut down for maintenance in mid-July. Hongsifang is increasing load. Woneng's 300,000-ton unit plans a maintenance shutdown from late July to August 20. Guanghui's 400,000-ton unit is under maintenance, restarting in late July. Meijin's 300,000-ton unit shut down this week, restart date pending. Zhonghuaxue's 300,000-ton unit is restarting. Zhengdakai plans maintenance in late July. Falling refined product prices have dragged MEG prices lower. Naphtha-based production margins have rebounded, while coal-based margins have slipped slightly.
Jan-Jun MEG Imports: -80.1% YoY, Exports Surge
From January to June 2026, China's total MEG imports were 2.58 million tons, down 32.9% year-on-year. 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. June MEG exports were 98,000 tons, up 13.2% month-on-month and 1019.8% year-on-year.
MEG Port Inventory Rebounds Slightly
On July 24, the MEG port inventory in the main East China region was 444,000 tons, up 64,000 tons from the previous week. Expected arrivals fell sharply to 38,700 tons. Meanwhile, outbound volumes declined from highs.
MEG Producer Inventory Up Sharply, Polyester Plant Inventory Days Continue to Fall
As of July 24, polyester plants' MEG raw material stocking days were 12.8 days (down 0.7 days week-on-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 Sheet Estimates
Estimated Monthly PX Supply-Demand Balance
Entering Q2, due to limited crude oil supply, PX units followed refineries in reducing operating rates, but the overall decline was not significant, with operating rates still relatively high year-on-year. Downstream PTA entered a concentrated maintenance season starting in April, and some plants faced raw material shortages, causing PTA operating rates to fall to multi-year lows. This led to a marginal loosening of the PX fundamental picture. In June and July, with maintenance at several major units like Shenghong and Weilian Chemical, operating rates will enter a year-to-date low, tightening the PX supply-demand balance. In Q4, with the start-up of new units and the arrival of the downstream off-season, PX will begin to accumulate inventory.
Estimated Monthly PTA Supply-Demand Balance
In Q2, PTA units underwent seasonal maintenance, partly due to insufficient PX raw material supply, leading to a significant reduction in production and output. This situation is expected to continue until July. Exports declined year-on-year due to new overseas unit start-ups. The fundamental picture saw significant destocking in May, June, and July, with the pace of destocking narrowing in August. In Q4, fundamentals are expected to transition to inventory accumulation as supply recovers and the off-season arrives.
Estimated Monthly MEG Supply-Demand Balance
Entering Q3, due to ongoing uncertainty in the US-Iran situation and whether the Strait of Hormuz will be navigable, import volumes are expected to remain at low levels. Domestically, maintenance of non-ethylene-based MEG units is increasing, and as margins decline, operating rates are falling from highs. Overall, the production increase in Q3 compared to Q2 is expected to be limited. Assuming the Strait of Hormuz becomes navigable in August, imports may begin to slowly increase in September. Downstream polyester units will also increase operating rates and replenish inventories. The fundamental picture is expected to maintain a destocking state in Q3.
Xu Anjing
Practice Qualification Certificate No.: F03134529
Investment Consulting Certificate No.: Z0022195
Sina Cooperative Platform for Large Futures Account Opening – Safe and Secure Guaranteed