Summary of polyester industry chain market trends during the Spring Festival

During the holiday period, the polyester industry chain experienced limited fluctuations, while the global macroeconomic environment saw increased volatility, primarily driven by risks associated with Trump's tariff policies and U.S. economic data.

Tariffs

Trump's tariff policies continued to disrupt the market throughout the holiday, transitioning from market expectations to actual implementation. As a key negotiation tool, tariffs remained in a state of flux. The U.S. announced a 25% tariff increase on imports from Mexico and Canada, with implementation delayed by one month from the initial February 4 schedule. Additionally, a 10% tariff increase on Chinese imports was immediately enacted. In response, China announced multiple countermeasures against U.S. imports. Trade policies affecting Europe and South America also saw adjustments. The persistent uncertainty surrounding tariffs has deepened market concerns over U.S. reflation risks and debt issues.

Economic Data

The U.S. Q4 preliminary GDP annualized growth rate came in at 2.3%, missing the expected 2.6% and showing a sharp slowdown from the previous quarter. Despite the GDP deceleration, consumer spending remained strong, further reinforcing the stagflationary trend in the U.S. economy.

Market Sentiment and Commodities

Risk aversion remained elevated amid these developments, with stagflation fears and concerns over U.S. debt risks driving precious metals to new highs. Spot gold surged to $2,840/oz, setting a new record.

Meanwhile, oil prices saw a slight decline due to the impact of Trump's policies. From the beginning of the Spring Festival holiday until February 3, WTI crude oil fell by 1.05%, while Brent crude oil declined by 0.91%. However, the current oil market remains fundamentally tight due to OPEC+ production cuts and sanctions on Russia, providing strong downside support. In the short term, oil prices are expected to remain in a weakly fluctuating trend. Nonetheless, a divergence between expectations and reality is emerging, with Trump's policies exerting pressure on both the supply and demand sides. The market will closely monitor Trump's upcoming visit to Saudi Arabia.

Polyester Industry Chain Outlook

The polyester industry chain remained relatively stable during the holiday period. Looking ahead, expectations for polyester raw materials are improving, with the market likely to enter a state of tight balance.

PX-PTA: Low margins, high operating rates, and elevated inventory

The PX-PTA industry remains in a state of low profitability, high operating rates, and high inventory levels. The PX-Naphtha spread has slightly expanded compared to pre-holiday levels, reaching $209/mt on February 3, up 11% from $188/mt before the holiday. However, its overall profitability remains weak. Meanwhile, the PX-MX (FOB Korea) spread remains at a low level of $75/mt, meaning that PX producers are still operating at a loss.

Similarly, PTA processing margins remain compressed. Based on pre-holiday PTA prices, the processing margin hovers around 210 yuan/mt, reflecting poor profitability, which continues to constrain PTA plant operating rates.

The market is closely monitoring upcoming maintenance schedules for PX and PTA. There are no confirmed PX maintenance shutdowns in China for February. Starting in March and April, scheduled maintenance is expected to improve the PX supply-demand balance, shifting from the inventory buildup seen in January-February to a tight balance. April inventory drawdown is estimated to exceed 200,000 tons.

PTA maintenance expectations are also emerging. With polyester operating rates gradually recovering, PTA supply-demand conditions are showing signs of improvement. PTA inventory is expected to decline in March-April. However, considering the accumulated PTA inventory of over 900,000 tons from December 2024 to February 2025, along with the 1.1 million tons of inventory in futures delivery warehouses, upward price movement for PTA remains under pressure in the medium term.

MEG is expected to remain in an inventory build-up phase in the near term, with a total increase of approximately 400 kt expected during January and February. Visible inventories are projected to continue climbing, largely in line with expectations. A turning point in the supply-demand balance is anticipated in March, with a slight destocking trend expected from March to May.

As for the polyester sector, some units restarted operation or had turnaround during the Spring Festival holiday. The polyester polymerization rate increased limitedly on Feb 4, estimated to be 79.6%, up by one percentage point over pre-holiday level. The production resumption was slightly slower than the previous anticipation. More units will restart production from Feb 5 and the rise of run rate may accelerate. However, as some plants may delay restarting. The average polyester polymerization rate in February is estimated to be slightly lower than the earlier estimate 87%, and the average run rate of March and April is expected to be 91.5% and 93% respectively. The main variables affecting polyester polymerization rate in the future will still be in PET bottle chips. The processing spread of PET bottle chip remains low after intensive new units started operation. The production curtailment of large companies should be concerned later.

Downstream sectors mainly keep eyes on the influence of tariff policy and the resumption of production.

After the Spring Festival holiday, most DTY plants and fabric mills will restart operation near Feb 5-13 and the normal operating rate may appear until after Feb 13 after workers returned to work. This year, based on current market observations, some knitting fabric markets have relatively high inventories, coupled with fewer new orders. The enthusiasm for resuming work after the holiday appears to be mediocre. The recovery of operating rate may be lower than the same period of last year.