Polyester polymerization rate may hit yearly high in May

In April, under the turmoil of the "reciprocal tariffs" in the United States, the macro-economic unrest led to a sharp decline in commodity prices, and market sentiment hit rock bottom. However, after prices fell to relatively low levels, there was a rebound and recovery at the lows. Driven by the anticipation of favorable negotiation results, the market witnessed a round of replenishment, gradually alleviating inventory pressure and enabling the polyester market to achieve a smooth transition.

On the basis of the recent restoration of production in some units, some units undergoing maintenance and even new units are also facing startup, which may lead to a further upward revision of the estimated polyester polymerization rate and production in May. Judging from the current situation, the polyester polymerization rate has increased to 94% today, and the highest run rate for the month may fluctuate around 95% (unless there are more production cuts and maintenance beyond expectations). Thus, May is likely to see the peak operating rate in the first half of 2025, and there is even a possibility that it could be the peak rate for the whole year.

Regarding the reasons for the raise of estimated polymerization rate, they have been mentioned in the previous insight "Some thoughts on sequent polyester polymerization rate". In fact, in the first half of 2025, PFY plants have never been the main force for production cuts, and the fluctuation range has always been relatively small, unless affected by policy or regulatory factors (which have been rarely encountered this year). Moreover, PSF and PET bottle chip sectors, which were the main drivers of production cuts in previous years, have seen very different situations this year. For example, the large-scale production cuts of PET bottle chip in the first quarter alleviated the inventory pressure in stages, just in time to connect with the increased exports under low price, promoting a stable and even rising operating rate in stages. Even though the price spread of PSF has been compressed to some extent, compared with most previous years, it is still quite good. Coincidentally, some units that have been shut down for a long time are also being started up one after another recently. The convergence of these factors has led to a situation of relatively high operating rate in the short term.

When comparing polyester with its downstream sectors, the current market is indeed rather fragmented. From the perspective of downstream industries, the market has not improved in May; in fact, it may even be deteriorating. If in April there was support from the domestic sales and some non-US export markets, then in May, the volume in these areas will decline further. Market players hope the exports to the US to improve. Although there are occasional reports such as Amazon resuming purchases, in reality, enterprises haven't felt a significant improvement. In fact, before the China-US negotiations make substantial progress, although there may be a few roundabout measures, the overall situation seems difficult to change.

If there is anything that is supporting the operation of the market, then it is probably mainly the resilience of the enterprises. After all, if the tariffs hadn't been too outrageous at the beginning, many enterprises would still be trying to accept the situation--by further reducing costs and tolerating a little more losses. They would still be willing to give it a go in many cases. After all, the industry has been so competitive.

Moreover, after several rounds, the market generally believes that the price bottom is around this level. If those high-priced inventories stocked earlier aren't utilized when prices are low now, it will be even harder to break even-after all, it's really difficult for fabric prices to rise.

Furthermore, it's still the first half of the year. If enterprises simply give up now, what will they do for the rest of the year? Maybe if they persevere and wait a bit more, the business opportunities will follow.

From the perspective of polyester factories, this might still be a good time to keep operating. Since the downstream sectors are still holding on, the inventory is still under control and the prices are so low. After all, when the operating rate is high, the cost can be a bit lower. If they wait until the market can no longer hold up later, it will be even more awkward to decide whether to keep the unit running or not.

Polyester factories may face difficulties in the future. With firm supply and demand on PX and PTA markets, the cost side may face pressure. Coupled with weakening demand, the polyester factories may face increasing pressure in keeping the price spread, forcing more to cut production. In fact, some companies curtail production recently, but the impact is still limited for the time being, and the progress should be followed up.

Some friends have asked whether the operating rate will be high at the beginning and low later, just like in 2018? The China-US negotiations will definitely take quite a long time and can't be solved simply within a month or two. What's more, the overall situation of the global economy is likely to decline under such trade environment this year. It's really hard to be optimistic.

What we can do may be only following the changes in the situation step by step and make continuous adjustments.