The Ministry of Industry and Information Technology's Raw Materials Industry Department issued a notice on October 27, announcing a symposium on the development of purified terephthalic acid (PTA) and bottle-grade polyester chips scheduled for October 29. The meeting aims to address excessive competition within the industry and promote stable operations, sparking immediate market optimism and driving recent gains in the PTA sector.
Currently, the PTA industry faces a complex scenario of "weak fundamentals but strong expectations." On one hand, continuous capacity expansion has led to significant supply pressure. On the other, expectations of policy intervention, coupled with cost support and low valuations, provide a foundation for short-term price rebounds. However, the long-term outlook remains bearish due to weakening supply-demand dynamics, intensifying market volatility.
1. Policy Intervention Boosts Market Confidence The upcoming symposium explicitly targets "preventing and resolving excessive competition in the PTA and bottle-grade polyester chip industries," signaling strong regulatory intent. Rapid capacity expansion in recent years, along with aggressive pricing strategies by some producers to capture market share, has squeezed industry-wide profits. By October 2025, domestic PTA capacity reached 91.725 million tons/year, including new units from Shenghong (2.5 million tons) and Sanfangxiang (3.2 million tons), while demand growth remains sluggish, exacerbating supply-demand imbalances.
With processing margins persistently compressed—often into negative territory—especially for producers lacking integrated paraxylene (PX) supply, the industry has fallen into a vicious cycle of "more capacity, deeper losses." Government intervention seeks to guide orderly capacity release and curb unchecked expansion, shifting the focus from volume growth to quality upgrades. Market participants anticipate potential measures like output controls, industry consolidation, or coordinated production cuts, bolstering near-term sentiment.
2. Cost Support and Low Valuations PX prices, influenced by volatile crude oil, remain resilient at $820.83/ton as of October 27, providing a cost floor for PTA. Despite spot PTA prices recovering to 4,490 yuan/ton, processing margins linger at a meager 97.89 yuan/ton, marking four consecutive months of theoretical losses—particularly acute for non-integrated producers. These losses limit further price declines, creating a firm "cost bottom." Breaching full production costs could force output reductions, easing supply pressure.
New 2.7 million-ton PTA capacity in East China has kept spot supplies ample, with spot discounts to TA2601 futures at -80 to -85 yuan/ton. However, anticipation of coordinated cuts by major suppliers attending the symposium has fueled bullish sentiment.
3. Seasonal Demand Peaks but Lacks Momentum As the traditional "Golden September, Silver October" demand season winds down, terminal demand shows patchy recovery. Operating rates for chemical fiber weaving in Jiangsu-Zhejiang rose to 66.45% as of October 23, with order backlogs up 0.88 days to 15.68 days. Cooler weather has spurred seasonal fabric demand, supporting raw material destocking.
Yet, this uptick is unsustainable. Shrinking domestic margins and tepid export orders have kept buyers cautious, with procurement limited to immediate needs. Polyester firms face high finished-goods inventories and cash flow constraints, capping further output hikes. Midstream polyester digestion nears capacity, while downstream orders lack strength to absorb upstream supply expansions, leaving PTA demand support fragile.
4. Near-Term Rebound vs. Long-Term Risks Policy optimism, cost support, low valuations, and seasonal restocking underpin the short-term rebound. If major producers implement output cuts, PTA may avoid inventory builds in November-December, tightening spot spreads and fueling a "drawdown-and-rally" scenario.
However, long-term headwinds loom. New capacities—especially in East China—will pressure supplies by late Q4 or early next year. Downstream weavers, though holding decent near-term orders, remain wary of restocking, risking lower operating rates post-peak season. Seasonal trends suggest accelerated PTA inventory builds from December 2025 to February 2026.
The extent of production cuts will dictate near-term inventory trends. Aggressive reductions could avert surpluses and lift prices, but inadequate cuts would sustain weak fundamentals. Thus, the rebound’s upside appears capped, with structural overcapacity requiring prolonged industry consolidation. Current policy tailwinds offer sentiment relief rather than fundamental turnaround.
5. Trading Strategy - **Short-term bullish**: Favor tactical longs in TA2601 contracts, monitoring spot basis and trading volumes, amid policy tailwinds and seasonal demand. - **Long-term caution**: Avoid chasing rallies in deferred contracts as new capacities come online; consider profit-taking or hedging at resistance levels. - **Policy watch**: Symposium outcomes—particularly concrete output control or consolidation plans—could reshape market expectations and trigger structural adjustments.