At 5,055 RMB per ton as of May 13, this is the latest reading for China's MEG benchmark price, up more than 200 RMB from the low point earlier this month. More notably, the structural shift: spot quotes for polyester-grade MEG in East China have risen to 4,918-4,920 RMB/ton, with spot premium over futures widening steadily and tradable cargoes clearly tightening. What does this signal for the downstream polyester chain? The rigid pressure of cost pass-through is re-accumulating.
Import Cliff and Port Destocking: A Twofold Supply Squeeze
The core driver behind the current MEG price rally is the supply side, especially the sharp contraction in imports. The Middle East accounts for over 65% of China's total MEG imports, with Saudi Arabia alone contributing more than 55%. Recent shipping disruptions in the Strait of Hormuz, coupled with the continued shutdown of seven Saudi plants (totaling 4.17 million tons per year of capacity) due to previous attacks, directly pushed April imports below 300,000 tons, a multi-year low. May's expected arrivals are a mere 54,600 tons, and the port arrival slump is unlikely to reverse in the short term.
Rapid port destocking further confirms the supply tightness. As of May 8, MEG inventory at East China's main ports fell to 738,000 tons, down 110,000 tons week-on-week, already at a multi-year low. While import arrivals continue to decline, port outflows remain stable. During the May Day holiday, average daily outflows from East China ports increased by 30%-47.54% from the previous week. The tight spot circulation shows no signs of easing in the near term.
Cost and Demand: Floor Support and Ceiling Imagination
On the cost side, ongoing Middle East geopolitical tensions have kept international crude oil prices high, with Brent crude hovering around $110/barrel, significantly raising the cost center for MEG production. For coal-to-MEG, coal prices remain stable, and plant margins are in a decent range, providing solid floor support for market prices. For polyester plants, this means the downside room for MEG prices is already very limited.
The demand side provides stable just-in-time support. The downstream polyester industry's operating rate remains around 80%, and while end-use textile demand has seen minor fluctuations, overall resilience is strong with no large-scale production cuts. Under this supply-demand balance, MEG prices are prone to rise than fall, and as the spot premium persists, downstream procurement costs are gradually moving up.
Short-term Strength to Continue, but Three Variables to Watch
Overall, the short-term MEG market is concentrated with bullish factors: tightening import supply, low port inventory destocking, stable downstream demand, and strong cost support. Under the resonance of multiple positives, spot and futures prices still have room to rise. However, practitioners in the polyester chain need to focus on three variables:
First, the restart progress of Saudi plants. When the 4.17 million tons/year of shut capacity resumes will directly determine the pace of import replenishment. Second, the recovery of shipping through the Strait of Hormuz, which affects whether Middle Eastern cargoes can arrive smoothly. Third, the direction of crude oil prices; if Brent falls from $110/barrel, it will weaken cost support.