The core market dynamic is a contest between short-term demand weakness and the underlying support from medium-term inventory destocking.
An analysis of demand reveals two key aspects. In the short term, demand is soft. The period from May to June is traditionally a seasonal low, compounded by high crude oil and feedstock prices alongside geopolitical uncertainties, which have suppressed procurement by end-users. In the medium term, a supportive logic exists. A portion of this demand has been deferred or suppressed by high prices; this purchasing power is expected to be released once geopolitical tensions stabilize or raw material costs decline.
Since late February, geopolitical conflicts in the Middle East have not only driven a significant rise in crude oil prices but have also provided crucial cost-side support for chemical commodities. Furthermore, supply disruptions, such as shipping lane closures causing feedstock shortages for chemical plants, led to a rally based on supply shortage expectations. As the geopolitical situation has since fluctuated, the market, having reached elevated levels, has entered a phase of volatility. Recently, despite polyester feedstocks entering a phase of tangible supply shortage and inventory drawdown, price performance has been relatively weak, primarily due to demand-side constraints.
During March and April, despite some feedstocks being at relatively high inventory levels, geopolitical uncertainty and the anticipation of supply shortages led to very strong performance in both spot and futures markets. Currently, there are signs of geopolitical easing (though uncertainties remain), planned maintenance at feedstock plants is being realized, and polyester feedstocks have entered an inventory destocking phase. However, demand has been impaired, and performance has fallen short of expectations.
Specifically, May and June are inherently the off-season for the polyester chain. Concurrently, high crude oil and feedstock prices, coupled with geopolitical uncertainty, have delayed the procurement节奏 of end-users, resulting in deferred demand. Recently, end-users have primarily focused on consuming existing feedstock inventories, purchasing only for immediate needs. Consequently, both raw material and finished product inventories at the终端 are at low levels. Until feedstock prices retreat or the geopolitical situation clarifies, end-user purchasing enthusiasm remains subdued, limited to essential demand. This has led to lower-than-expected operating rates downstream; this week, the polyester operating rate has reached a relatively low level of around 82% for this period. However, part of this demand has been suppressed by high prices, and part is due to delayed procurement节奏. This pent-up demand is likely to be released once the geopolitical situation stabilizes or raw material prices fall, which will then provide support for polyester feedstocks.
Overall, short-term demand has been weaker than expected, weighing on the feedstock sector. Polyester feedstocks have recently followed a destocking logic that contrasts with earlier expectations, but excessive pessimism is unwarranted. Once feedstock prices adjust to an appropriate level, they may stimulate the release of deferred demand. Therefore, polyester feedstocks still possess a degree of underlying price support.
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