In the cost sector, crude oil fluctuated this week with a rebound observed on Friday, warranting close attention to geopolitical developments.

For PX, China's operating rate stood at 89.0% this week (down 0.4% week-on-week), while the Asian PX operating rate was 81.0% (up 0.2% week-on-week). PX prices surged strongly this week, driven by gains in PTA, as capital markets expressed optimism towards the chemical industry. Supported by solid fundamentals, capital inflow into PX and PTA remained active, with the PXN spread rising to USD 357/ton on Friday. The floating price for PX weakened notably; spot transactions for March dropped to around -6 by Friday (compared to -3 the previous Friday), while April spot transactions also fell to the -3 to -4 range. The paper market structure similarly underperformed, with only May contracts showing relative strength. The March/May spread widened to -6, and the May/September spread expanded to around 11. Asian PX operating rates remained largely stable this week, with Zhejiang Petrochemical's output reduction being effectively implemented, leading to a slight decline in domestic operating rates. Recent significant improvements in PX margins have raised expectations for increased supply both domestically and internationally. Additionally, arbitrage opportunities between domestic and international markets may lead to higher imports. Meanwhile, downstream polyester plant maintenance plans are being realized, indicating currently weak fundamentals. However, medium-term expectations remain favorable, though it is difficult to confirm whether improved profitability will lead to the cancellation or postponement of PX maintenance plans in the second quarter. Market participants should monitor the implementation of PX maintenance schedules and import trends.

For PTA, China's operating rate was 76.6% (down 0.3% week-on-week), with the spot processing spread at CNY 426/ton (an increase of CNY 106 from last week). PTA prices rose rapidly this week amid increased capital attention, leading to a significant recovery in processing spreads. No significant changes were observed in PTA plant operations, while the supply-demand structure weakened slightly compared to the previous week, and the PTA spot basis differential weakened. As Spring Festival-related production cuts at polyester plants materialize, near-term PTA supply-demand dynamics are trending towards accumulation. In the medium to long term, with the concentrated capacity expansion cycle concluding, PTA processing spreads are expected to gradually improve, maintaining a positive outlook for the forward market.

On the demand side, the operating rate for weaving machines in Jiangsu and Zhejiang was 48.0% this week (down 7.0% week-on-week), while the polyester operating rate was 86.2% (down 2.1% week-on-week). Fabrication load declined at an accelerated pace as downstream plants began concentrated holiday shutdowns. With polyester filament prices rising rapidly in tandem with raw material costs, and the difficulty of passing these increases further downstream, the focus shifted towards consuming existing raw material inventories. This led to passive inventory replenishment amid the rapid price increases this week. In the polyester sector, operating loads decreased more quickly as Spring Festival maintenance plans were progressively implemented. Average monthly operating rates for January and February are estimated at 88.5% and 80.5% respectively, with close attention being paid to the fulfillment of maintenance schedules.

For PF, the operating rate for direct-spun polyester staple fiber was 97.9% this week (up 0.3% week-on-week). PF plant equity inventory days were 7.3 days (down 2.3 days week-on-week). The operating rate for polyester yarn was 59.0% (down 2.0% week-on-week). Physical inventory for 1.4D fiber was 13.0 days (down 1.7 days week-on-week), and equity inventory for 1.4D was 3.3 days (down 1.2 days week-on-week). Direct-spun PF prices followed raw materials higher this week, but the gains were less pronounced due to weak demand. Operating rates saw minor increases at some plants, while most remained stable. Price increases stimulated sales, leading to a noticeable reduction in PF inventory this week. On the demand side, pure polyester yarn and polyester-cotton yarn prices saw moderate increases. Sales of pure polyester yarn were smooth, with inventory drawdowns; sales of polyester-cotton yarn improved somewhat, inventory decreased slightly, but cash flow losses widened.

For PR, the operating rate for bottle chip plants (based on maximum capacity) was 66.4% (down 2.0% week-on-week). Bottle chip plant inventory was 13.0 days (down 1.1 days week-on-week). The spot processing spread for bottle chips was CNY 602/ton (an increase of CNY 74 from last week). This week, with a predominantly long positioning from funds and strong price increases in upstream polyester raw materials, most polyester bottle chip producers raised prices in line with costs, with overall processing margins hovering above CNY 500. Fundamentally, Spring Festival maintenance plans for polyester bottle chip plants are being executed, leading to smooth pre-holiday inventory drawdowns and a slight reduction in spot market supply. Transactions during the price rise were mainly driven by traders making moderate replenishments, resulting in an increase in polyester bottle chip processing margins.

Trading Strategy Outright Positions: PX/PTA/PF/PR are biased to the upside in the short term due to fund positioning increases, but the market structure and near-term fundamentals have not shown significant improvement. The current situation reflects weak spot fundamentals against strong expectations, with PTA showing relative strength over PX. Monitor whether PTA operating rates see unplanned recoveries amid improved processing spreads and the realization of PX maintenance plans. Inter-commodity: None Inter-temporal: None

Risks Substantial volatility in crude oil and gasoline prices; macroeconomic policies exceeding expectations.