The supply-demand balance for PTA has been mismatched for an extended period, but with no new capacity additions planned for 2026, the conditions for a recovery in processing fees from the supply side are now in place. For MEG, the market is shifting from a loose to a rebalanced state, though a full recovery in profitability will require more time.
The PTA supply-demand structure is expected to accelerate from a structural equilibrium toward a tight balance, offering significant potential for processing fee recovery. Currently, MEG prices and profitability are under pressure, with pessimistic expectations largely priced in, leaving substantial room for price elasticity. The value of related investment targets is considered undervalued.
Key viewpoints from Huachuang Securities are as follows: PTA and MEG profitability is under pressure, but the pace of supply-side improvement varies. For PTA, between 2020 and 2025, domestic capacity expanded from 62.24 million tons to 107.04 million tons, a compound annual growth rate (CAGR) of 11.5%, while demand growth during the same period was only 8%, creating a long-term supply-demand mismatch. The average processing fee dropped to 261 yuan per ton in 2025, a year-on-year decline of 26.1%, placing significant strain on industry profitability. However, the supply inflection point has arrived—2026 will see no new capacity additions, marking the first zero start-up since 2019, ending a seven-year expansion cycle. PTA will become the only segment in the PX-PTA-polyester main chain with no new capacity, setting the stage for processing fee recovery from the supply side.
For MEG, domestic capacity expanded rapidly from 15.54 million tons to 30.30 million tons between 2020 and 2025, a CAGR of 14.3%. The industry remained in a loss-making state from 2022 to 2025, with gross profit hitting a trough of -448 yuan per ton in December 2025. In 2026, an additional 2.25 million tons of capacity is expected, shifting the supply-demand structure from loose to rebalanced, meaning profitability recovery will require more time.
Industry self-discipline conditions for PTA are mature, with strong certainty for advancing anti-internal competition and a promising outlook for processing fee recovery. As of June 2026, the top seven PTA producers controlled 67% of the capacity. The four leading companies—Hengli, Rongsheng, Xinfengming, and Hengyi—together have nearly 50 million tons of capacity. Under this oligopolistic structure, coordination costs for leaders are low, making self-discipline conditions the most mature among chemical products. The zero new capacity in 2026 significantly reduces concerns about production cuts, and leaders are increasingly willing and able to coordinate capacity release schedules proactively.
PTA imports totaled only 20,000 tons in 2025, accounting for just 0.03% of apparent consumption, returning pricing power to domestic leading enterprises. Export channels continue to expand, with 3.82 million tons exported in 2025 to destinations including Vietnam, Egypt, Oman, Russia, and Turkey, providing an effective inventory digestion channel for production cuts by leaders. Demand-side support remains solid, with approximately 5.6 million tons of new domestic polyester capacity in 2026 providing a rigid pull on demand. The supply-demand structure is expected to accelerate from a structural equilibrium to a tight balance, offering significant elasticity for processing fee recovery. For every 100 yuan per ton increase in PTA prices, the estimated profit elasticity to market capitalization for Xinfengming and Hengli Petrochemical is 2.3% and 0.9%, respectively.
MEG supply and demand are expected to shift toward rebalancing, but the bottom-of-cycle characteristics are clear. Most of the 2.25 million tons of new capacity in 2026 is scheduled for the second half of the year, leading to limited actual supply growth in the first half. Combined with polyester demand from 5.6 million tons of new capacity, prices are expected to strengthen in the first half of the year. In the second half, as new capacity gradually comes online, supply pressures will increase, with a trend of higher prices early and lower later. From 2027 to 2028, the industry supply-demand rebalancing pattern is expected to gradually establish. Currently, MEG prices and profitability are under pressure, with pessimistic expectations largely priced in, leaving substantial room for price elasticity. The value of related targets is considered undervalued. In a scenario where MEG prices rise by 1,000 yuan per ton, the estimated profit elasticity to market capitalization for Dongfang Shenghong is 1.5%, making it the most prominent among representative companies in the industry.
Investment targets worth monitoring include: Hengli Petrochemical, Rongsheng Petrochemical, Hengyi Petrochemical, Dongfang Shenghong, Tongkun Group, Xinfengming, Sinopec, PetroChina, Wankai New Materials, and Huarong Material.
Risk warnings: 1. Fluctuations in crude oil prices; 2. Demand below expectations; 3. Export risks; 4. Policy adjustments in the industry.