5,055 RMB per ton – that is the new benchmark price for domestic MEG as of May 13. Compared to the beginning of the month, this represents a jump of over 200 RMB per ton. For the polyester supply chain, this is more than a routine fluctuation. It reflects a tangible tightening of import channels, a sharp drawdown in port inventories, and sustained downstream demand. The cost floor for chemical fiber feedstocks is undergoing a systemic shift upward.
Supply Side: Import Cliff and Plant Shutdowns
The core driver of this rally lies on the supply side. The Middle East accounts for over 65% of China's MEG imports, with Saudi Arabia alone contributing more than 55%. Recent shipping disruptions in the Strait of Hormuz, combined with the continued shutdown of seven Saudi MEG plants (totaling 4.17 million tons per year of capacity) due to earlier attacks, have created a perfect storm. April imports fell below 300,000 tons – a multi-year low – and May arrivals are projected at only 54,600 tons. The persistent lack of import supplementation has clearly tilted the domestic supply-demand balance.
Cost pressures are also compounding the situation. Brent crude remains elevated near $110 per barrel, directly raising production costs for oil-based MEG. While coal-based routes maintain stable margins thanks to steady coal prices, the overall cost support remains solid. For polyester plants, this means the floor price for feedstock procurement has been lifted, with no near-term retreat in sight.
Inventory and Demand: Accelerated Drawdown, Stable Offtake
Port inventory data best illustrates the severity of the supply-demand mismatch. As of May 8, East China main port MEG stocks had fallen to 738,000 tons, a weekly drop of 110,000 tons and a multi-year low. Import arrivals remain depressed, while average daily port shipments during the May Day holiday rose 30% to 47.54% week-on-week, indicating robust downstream offtake even during the holiday period. The tightening of spot supply has pushed spot prices to a notable premium over futures, with basis widening.
On the demand side, downstream polyester operating rates remain around 80%, providing steady support for MEG consumption. While the downstream weaving sector has seen minor fluctuations, overall resilience remains intact, with no widespread capacity cuts. This steady demand provides the most solid foundation for MEG price support.
Industry Impact: Cost Pass-Through and Procurement Strategy Adjustments
For polyester plants, rising MEG prices directly increase feedstock costs. At the current benchmark of 5,055 RMB/ton, the increase is over 4% from early May levels. Given the lag in polyester product price pass-through, polyester margins will face near-term compression. More importantly, if the import squeeze persists, MEG prices could climb further, forcing polyester plants to either raise product prices or adjust their product mix to maintain profitability.
For fabric buyers, this feedstock price signal cannot be ignored. Polyester is the most widely used chemical fiber fabric raw material, and its cost changes will eventually transmit to greige and finished fabric prices. If the current strong MEG trend extends into June, fabric procurement costs in Q3 will face upward pressure. Buyers should reassess inventory cycles and price-locking windows.
Outlook and Risk Factors
In the near term, the bullish factors for MEG remain concentrated. The timeline for Saudi plant restarts is unclear, and the resumption of shipping through the Strait of Hormuz is uncertain. Import supplementation is unlikely to improve soon. With port inventories at low levels, steady downstream demand, and elevated crude oil costs, MEG prices still have room to rise.
However, risks exist. Key factors to watch include: the progress of Saudi plant restarts – a rapid recovery in Middle East supply could quickly boost imports; crude oil price volatility – if geopolitical tensions ease and oil prices fall, cost support would weaken; and port arrivals and inventory changes – if arrivals surprise to the upside, the spot tightness could ease.