**Domestic Demand Tepid, External Demand Under Pressure**

Domestic demand: Textile and apparel retail consumption continues to underperform overall social consumption levels, showing mediocre performance.

External demand: The "rush to export" effect has weakened in the second half of the year, coupled with economic uncertainties in Europe and the US, making Q4 external demand prospects unclear.

**Raw Material Differentiation**

PX: In a prosperity cycle, but marginally turning loose in Q4. Supply recovery after maintenance completion, while demand falls due to PTA losses and off-season blending demand.

PTA: Existing capacity surplus, low processing fees, industry losses. Equipment maintenance provides "self-balancing," with Q4 inventory pressure marginally easing.

MEG: Current fundamentals are acceptable, but expectations are weak. Q4 new capacity additions, domestic supply remains high, demand faces seasonal decline, expected to enter inventory accumulation cycle.

Domestic demand is moderate, with domestic textile and apparel retail consumption generally below social retail consumption. Terminal weaving performance has consistently underperformed the polyester segment. Polyester operations show certain resilience due to direct polyester exports outperforming terminals. Second-half terminal export rush weaker than first half. "Golden September, Silver October" orders may recover month-on-month but subsequently decline. External demand after October also faces significant uncertainties.

Polyester capacity grows steadily with expected growth rate of 4.6% this year. Q4 polyester operations expected to peak in October then decline. Overall polyester operations maintain resilience this year, with expected polyester output growth around 7%.

**PX Overall in Prosperity Cycle, But Q4 Expected Supply Increase and Demand Decrease, Marginally Turning Loose**

This year PX has virtually no new capacity additions, while downstream PTA still has capacity additions in the second half. From a static perspective, with PTA new capacity additions, current PX is relatively tight. However, current short-process profits are high, toluene disproportionation profits are acceptable. PX domestic production will gradually increase after Q2-Q3 maintenance, imports expected to maintain high levels. Meanwhile, low processing margins lead to PTA new capacity delays and existing facility maintenance willingness increases, blending enters off-season, PX supply-demand marginally turns loose.

**PTA Expected to Add 8.6 Million Tons New Capacity This Year, Short-term Existing Capacity Surplus Obvious**

PTA oligopoly degree is high, single facility scale is large, having significant marginal impact on balance sheets. First half, especially Q2, due to facility maintenance, PTA processing margins were acceptable. Starting Q3, PTA processing margin center dropped another level, at around 200 yuan/ton or below, with almost all facilities in loss-making status. Recent factory maintenance expectations are clear, processing margins have recovered somewhat but remain at low levels. Focus on unexpected facility maintenance against the backdrop of low processing margins. Q4 PTA overall tends toward inventory accumulation, but marginally eases due to clear supply contraction expectations.

**2024-2025 MEG Capacity Growth Rate is Low**

However, Q4 this year with Yulong Petrochemical's production start, MEG new capacity will be successively added. Growth rate is much lower than 2020-2023. Import-wise, Q4 MEG imports expected to remain at low levels, estimated monthly average 580,000-600,000 tons. MEG coal chemical profits are high, petrochemical low but significantly improved from last year. Combined with MEG new capacity additions, despite some coal chemical maintenance, domestic supply Q4 expected to maintain high levels. Demand-wise, current period is the best time, Q4 faces marginal decline expectations. Q4 MEG overall expected to accumulate inventory.

Among polyester raw materials, PX has the best prosperity. PTA has existing surplus, while MEG current situation is better but expectations too weak.

**01 Domestic Demand Moderate, External Demand Still Uncertain**

**1.1 Domestic Demand Performance Moderate**

2025 Jan-Aug clothing, shoes, hats and textile retail sales cumulative year-on-year growth 2.9%, of which clothing retail sales cumulative year-on-year 2.2%, while social retail sales 2025 Jan-Aug cumulative growth 4.6%. Domestic textile and apparel retail consumption generally below social retail consumption, showing moderate performance. National per capita disposable income first half 2025 actual year-on-year 5.4%, moderate performance.

Terminal operations year-on-year significantly weaker than last year. Terminal weaving performance consistently underperforms polyester segment, mainly due to demand indeed lacking vigor and own capacity expansion, corresponding to poor individual experience. Terminal polyester operations have significant improvement compared to last year, importantly polyester exports are quite strong (textile and apparel industry migration), plus previous tariffs and war disruptions leading to terminal advance purchases, polyester inventory pressure stages easing, operations maintained.

Q4 expects October demand month-on-month improvement, but subsequent demand seasonal decline. Currently in traditional peak season of "Golden September, Silver October," but terminal order intake not as expected. With temperature drop, expect October orders month-on-month improvement, but subsequent demand faces decline. Overall, terminal order demand year-on-year worse than last year.

**1.2 External Demand Still Uncertain**

Jan-Aug textile yarns, fabrics and products exports cumulative year-on-year 1.6%, last year growth 3.5%. Jan-Aug clothing and clothing accessories exports cumulative year-on-year -1.7%, last year -1%. But from export volume perspective, this year still growing, indicating export unit prices dropped significantly this year. Additionally, textile and apparel industry migration leads to terminal external demand order decline.

First half export rush quite obvious, currently relatively weakened, and external demand situation after China-US tariff exemption again. European and US manufacturing PMI still below boom-bust line, combined with tariff impacts, recession expectations strong, constraining total commodity demand.

External demand excluding China still acceptable. Vietnam and South Korea exports 2024 year-on-year 14% and 4% respectively, this year Jan-Aug cumulative year-on-year 14.83% and 3.58% respectively, growth rates acceptable. US wholesaler clothing and fabric inventory-to-sales ratio stabilized at low levels, whether restocking remains uncertain. Current demand uncertainty and tariff-driven price increases make restocking hopes dim.

**Polyester Direct Exports Better Than Terminals**

Last year exports cumulative year-on-year growth 15.23%, mainly due to terminal weaving capacity spillover. Southeast Asian countries still need to import semi-finished polyester raw materials, plus US tariff exemptions for Vietnam causing increased weaving production for export. Jan-Aug polyester exports cumulative year-on-year growth 15.8%, with bottle-grade chips and staple fiber exports particularly bright. Bottle-grade chip exports due to domestic overcapacity creating global price depression. Expected polyester direct external demand this year will continue outperforming terminal exports.

**1.3 Polyester Capacity and Output Will Grow Steadily**

According to public information statistics, this year expects 4 million tons new polyester capacity, growth rate 4.6%. Currently 2.6 million tons capacity already in production. Second half expects 2 million tons new capacity, but actual production expected around 1.5 million tons, need attention to execution strength.

Against backdrop of neutral capacity growth and polyester operating rate higher than last year, we expect this year's polyester output growth around 7%. Q4 operations may peak in October then decline month-on-month.

**02 PX Marginally Turning Loose But Still in Prosperity Cycle**

This year PX basically has no new capacity additions, Yulong Island 3 million tons PX landing time has significant uncertainty. Downstream PTA still has capacity additions. From capacity structure perspective, PX supply-demand changing marginal facility is Yulong Petrochemical, focus on its landing situation.

Second quarter had many maintenance facilities, third quarter still some maintenance, but maintenance facilities gradually returning. Expected Q4 domestic PX operations will maintain high levels.

Upper half foreign maintenance caused low imports, current PX short-process and reforming profits acceptable. Starting late Q3, imports gradually recovering, expected Q4 PX imports will maintain last year same period high levels.

**PX Q4 Marginally Loose**

After PX Q2-Q3 facility maintenance, operations gradually increase. PTA low processing margin background has maintenance willingness, Q4 PX marginally loose.

Blending demand seasonally declines. US enters gasoline off-season, crack spreads seasonally weaken. Global new energy proportion gradually increases, gasoline consumption expectations poor. Current aromatics US-Asia price spreads at relatively high levels due to weak Asian MX.

Current short-process profits good, favorable for PX increasing marginal output. Asian disproportionation profits acceptable, MX-PX price spreads high.

Asian aromatics output still neutral to high, Asian aromatics (xylene) output high, exports acceptable.

**03 PTA Self-Balancing Under Low Profit Background**

**PTA Existing Surplus**

PTA this year expects 8.6 million tons new capacity additions. PTA existing capacity surplus requires PTA factories actively reducing production to achieve dynamic balance.

**PTA Large Facility Maintenance Has Significant Marginal Impact**

PTA has evolved from early state-owned dominated era to private-led era. With technology iteration and development, single facility scale and industry concentration have significantly improved. CR5 occupancy has reached 70%, mainstream suppliers have enhanced spot control capability and greater supply-demand allocation capability for optimal operations. Due to large single facility scale, single facility start-stop has significant impact on balance sheets.

First half PTA maintenance intensity large, Q4 maintenance intensity small, focus on unexpected maintenance. Due to low processing margins and routine maintenance, PTA facilities had large maintenance scale in Q2. Looking at Q4, expected maintenance facilities fewer, but under current low processing margin background need attention to unexpected maintenance.

**Processing Margins Low-level Fluctuation**

First half especially Q2 due to facility maintenance, PTA processing margins acceptable. Starting Q3, PTA processing margin center dropped another level, at around 200 yuan/ton or below, almost all facilities in loss-making status. Recent factory maintenance expectations clear, processing margins recovered somewhat but remain low. Low processing margins lead factories willing to adjust operations.

PTA Q4 overall inventory accumulation, but marginally eases due to clear supply contraction expectations.

**04 MEG Expectations Still Weak**

**Recent Two Years Capacity Growth Rate Low, But Still New Capacity Subsequently**

2024-2025 MEG capacity growth rate low, but Q4 this year with Yulong Petrochemical production start, MEG new capacity will be successively added. Growth rate much lower than 2020-2023.

Due to domestic substitution impact, import volumes have maintained low levels past two years. Overall expected Q4 MEG imports still at low levels, estimated monthly average 580,000-600,000 tons.

**Q4 Output Expected to Maintain High Levels**

Due to coal chemical good profits and petrochemical low but significantly improved from last year, combined with MEG new capacity additions, despite some coal chemical maintenance, domestic supply Q4 expected to maintain high levels.

**This Year MEG Relative Profits Overall Acceptable**

Due to low coal prices, coal-based MEG profits good this year, petrochemical profits also significantly recovered from last year, leading to obvious recovery after Q2 maintenance season.

**MEG Q4 Overall Expected Inventory Accumulation**

Q2-Q3 MEG due to maintenance and downstream operation resilience showed destocking, current inventory low. But with profit recovery and maintenance completion, supply also gradually recovers, combined with new capacity MEG expected high supply, while terminal demand Q4 faces marginal decline expectations, expected Q4 MEG overall inventory accumulation.

Among polyester raw materials overall, PX has best prosperity. PTA has existing surplus, while MEG current situation better but expectations too weak.

Report completion date: September 30, 2025