In September, geopolitical tensions escalated sharply, driving international oil prices to surge and pushing up the cost of polyester raw materials; consequently, polyester market prices rose. However, with downstream demand failing to recover effectively while costs continued to climb, the transmission of costs was hindered. This exacerbated corporate losses and significantly dampened the willingness to produce. To avoid industry-wide losses—compounded by tight raw material supplies—polyester enterprises expanded the scope and extended the duration of maintenance shutdowns. Although the traditional peak consumption season is underway and a seasonal uptick in downstream demand is anticipated, negative feedback regarding demand is accumulating, and the pressure from supply contraction persists, placing the polyester market under downward pressure.

Weak Demand Follow-through; Polyester Operating Rates Decline from Low Levels

As September began, weak demand follow-through made it increasingly difficult for polyester market prices to sustain their upward momentum. Despite the arrival of the "Golden September" peak season, downstream enterprises lack the capacity to absorb high-priced raw materials; most plan to delay further purchasing until existing low-cost inventories are depleted and prices pull back. Meanwhile, concerns over poor cost pass-through and compressed profit margins have led downstream players to adopt a cautious strategy of stocking up in small batches only when prices dip. As of September 4, only a few enterprises held enough raw material inventory to cover the entire month, with most stocked only through the Mid-Autumn Festival holiday; if costs stabilize after a slight pullback, some "essential" restocking is expected around September 10. Furthermore, the continuous rise in raw material costs has made negotiating new orders difficult, resulting in generally weak order volumes; most enterprises hold orders sufficient for only about a week, with few able to sustain operations for more than a month.

Negative demand feedback continues to ripple upstream, leading to a significant expansion in the scope of production cuts and shutdowns at polyester plants. On one hand, soft drink manufacturers—driven by a habit of early stocking—currently hold relatively ample raw material inventories; however, as the weather cools and their traditional peak season draws to a close, demand support for polyester bottle chips is gradually weakening. On the other hand, while the textile and apparel sector is in a critical period for annual sales volume growth, raising prices for finished goods faces significant resistance. To control costs, the terminal market has adopted a staggered approach to passing on fabric price hikes, causing cost pressures to remain concentrated at the greige fabric and finished fabric stages, thereby further suppressing demand for polyester fibers. As of September 4, the operating rate of polyester plants had dropped to 72%—16 percentage points lower than the same period in previous years. Leading manufacturers of polyester filament and staple fiber continued to curtail production due to sluggish demand recovery, while producers of polyester bottle chips and film joined the ranks of those cutting output starting in mid-to-late August, driven by cost pressures.

Significant Cost Volatility Likely; Terminal Demand Recovery is the Key Variable

Price trends in the polyester feedstock market are currently diverging, and the market center of gravity is likely to shift downward overall. Amid expectations of persistent geopolitical tensions, international oil prices have entered a range of narrow fluctuations at high levels; however, distinct supply-demand fundamentals for specific feedstocks have caused price trends to diverge. PTA prices have recently seen a moderate pullback as previously idled units restarted en masse, leading to expectations of looser supply. Conversely, Mono-ethylene Glycol (MEG) prices remain strong; imports have contracted and the recovery cycle is lengthy, keeping port inventories extremely low—a trend of destocking likely to continue through September. Looking ahead, the significant rift between the US and Iran regarding the Strait issue is unlikely to ease in the short term, keeping oil prices elevated; however, should Middle East tensions de-escalate, international oil prices would drop sharply, dragging down the markets for both key polyester feedstocks.

The polyester market has already experienced a negative demand feedback loop characterized by declining sales, rising inventories, and expanded production cuts; the pace of terminal demand recovery during the "Golden September" peak season is critical. Although inventories of unfinished fabrics (greige goods) have fallen to historic lows and overall polyester enterprise inventories remain at reasonably low levels—with market expectations for restocking during the traditional peak season—terminal weaving enterprises remain cautious about stocking up on raw materials due to current profit pressures and potential disruptions such as a cooling of the international geopolitical climate. Meanwhile, a PTA unit with an annual capacity of 4.5 million tons restarted on September 4, and units totaling 7.65 million tons of annual capacity are set to resume operations soon; this strong expectation of increased supply acts as a further bearish factor for the polyester market. With terminal orders yet to show a substantial rebound and operating rates for texturizing and weaving remaining at historical lows for this time of year, the polyester market is at a critical juncture where cost pass-through struggles against the reality of demand; whether the anticipated peak season materializes will be the decisive factor for future price trends.

Overall, geopolitical risk remains the primary external variable for the polyester market in September, while the pace of terminal demand recovery is the core internal driver of market direction. Currently, inventories across the downstream and terminal sectors have been drawn down to low levels; if geopolitical tensions do not ease by mid-September, the greige fabric and finished fabric sectors will likely begin absorbing rising costs and initiate a round of concentrated restocking. This release of demand could offset the pressure from rising upstream supply, helping polyester prices continue to recover. Conversely, if geopolitical tensions ease by mid-September, upstream raw material prices would drop significantly; however, supported by supply constraints and lean inventories, the decline in polyester market prices would likely lag behind the drop in costs. Nevertheless, given that the greige and finished fabric sectors are reluctant to bear the risk of inventory devaluation, expectations of sluggish demand recovery may well materialize, resulting in a lackluster "Golden September." In this scenario, the polyester market might see continued supply contraction, with prices remaining under downward pressure. (Source: Hexun)

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