Polyester polymerization rate gradually rising, demand expectations yet to be fulfilled

As mid-March approaches, the recovery of the polyester polymerization rate remains slower than anticipated, with weak downstream demand continuing to weigh on market sentiment.

However, recent developments indicate a gradual increase in the polymerization rate following the scheduled restarts of Xianglu and Dragon's units over the weekend. Production tracking shows that several units have resumed operations or are ramping up, bringing the polyester polymerization rate to approximately 90.6% at the start of the week.

Further upside remains in polyester filament yarn and staple fiber. Some filament yarn units are still in the process of heating up or have plans to raise operating rates, potentially pushing the mid-March polymerization rate slightly above 95%. Similarly, staple fiber production is expected to recover, with the operating rate projected to reach around 91% by mid-March.

Looking ahead to the second half of March, the primary driver of further gains may come from bottle-grade PET. The post-holiday recovery in the overall polyester polymerization rate has been largely constrained by concentrated maintenance in this segment. However, since late February, transaction activity in the bottle-grade PET market has increased, inventory levels have declined, and market sentiment has improved. Several bottle-grade PET units, including those of Yisheng, Yizheng Chemical Fiber, and Wankai, are scheduled to restart in mid-to-late March. That said, uncertainties persist regarding maintenance schedules and potential adjustments in operating rates for some units. If restarts proceed as planned, the operating rate for bottle-grade PET could rise to around 80% or slightly higher by the end of March, lifting the overall polyester polymerization rate to approximately 93%.

Nevertheless, risks remain. During the latest assessment, certain restart plans were revised again, with large-scale plant restarts still facing uncertainty. Delays or further changes in these schedules could slow the pace of recovery into April, potentially leading to downward revisions in March's polymerization rate projections.

While the near-term outlook remains upward, it is crucial to recognize that production rates do not always align with actual market demand. Transaction activity in staple fiber and bottle-grade PET picked up in late February, while filament yarn sales saw a surge at the end of February and in early March-indicating some market resilience at lower price levels. However, feedback from downstream sectors, including texturing, weaving, and dyeing, suggests that order volumes have yet to show meaningful improvement. The market remains in a cautious maintenance phase, awaiting clearer signs of demand recovery. Some industry participants expect a pickup in orders by mid-to-late March, with the Qingming Festival potentially serving as a turning point.

From a macroeconomic perspective, previous analyses -- "Policy game framework of the Trump 2.0 era", -highlighted concerns over demand expectations for 2024. These concerns now appear more justified, with near-term headwinds mounting. Recent capital market movements also suggest that investors are pricing in increased risks.

At this stage, the forecast does not account for potential production cuts in filament yarn and staple fiber. However, if weak downstream demand persists into April, moderate production adjustments cannot be ruled out.

By April, operating trends across different polyester segments may begin to diverge. Bottle-grade PET units, which have undergone maintenance or production cuts in February and March, may gradually return to normal operation. However, attention will then shift to whether polyester fiber production needs to be curtailed to rebalance supply and demand in the broader market.