International oil prices plunged sharply on June 12, with Brent crude falling over 4%, dragging down the entire domestic chemical market. PTA, ethylene glycol, and staple fiber—key products in the polyester chain—suffered the heaviest losses, with some contracts dropping over 3% intraday. Panic quickly spread, spot market quotes became chaotic, and downstream buyers turned cautious.
Cost Support Collapses
The core driver behind this collective slump is crude oil. The Trump administration's cancellation of planned military strikes on Iran and the finalization of US-Iran negotiations squeezed out geopolitical risk premiums. Although Iran remains cautious and the Strait of Hormuz is still closed, the market has already priced in supply relief expectations.
For the chemical fiber industry, crude oil is a direct cost input for PTA and ethylene glycol. Industry data shows that for every $1/bbl drop in oil, PTA production costs fall by about 35-40 yuan/ton. With oil falling over $3/bbl, PTA cost support has been cut by 100-120 yuan/ton, opening the door for downstream price declines.
Importantly, the polyester chain was already in a weak balance. According to China Customs data, PTA output grew 8.2% YoY in Jan-May 2026, but downstream polyester operating rates hovered around 78%, below the 83% level of the same period last year. Under supply-demand slack, cost-side easing will accelerate price corrections.
Market Sentiment and Price Transmission
The impact of geopolitical events on the polyester chain is not linear. PTA futures fell the most, ethylene glycol less, and staple fiber was relatively resilient. This divergence reflects inventory structure and demand elasticity differences. PTA social inventory has stayed above 2.8 million tons for two months, a medium-high level, making it more sensitive to bad news.
Ethylene glycol, though hit by oil, has port inventory at a low level (about 550,000 tons) and import dependence of 60%, limiting downside. Staple fiber, supported by just-in-time demand from downstream weaving mills, saw the smallest decline. This shows that even during systemic risk release, fundamentals can buffer different products.
For textile mills, raw material price volatility directly affects order-taking confidence. Industry surveys show that Jiangsu and Zhejiang weaving mills held 7-10 days of raw material inventory last week, a low level. The price decline may prompt destocking, further pressuring spot prices. However, if oil stabilizes, low prices could trigger restocking.
Medium-to-Long Term Logic Unchanged
Despite short-term bearish sentiment, the core contradiction lies in supply and demand. Whether the US-Iran agreement is signed and when the Strait of Hormuz reopens remain key variables for oil. If the deal goes through, increased supply will lower oil's center of gravity, weakening cost support. If negotiations falter, risk premiums may return quickly.
On the domestic front, the polyester chain's capacity expansion cycle is not over. Industry data shows about 3 million tons of new PTA capacity and 1.2 million tons of new ethylene glycol capacity are scheduled for H2 2026. Supply growth plus cost decline will compress industry profit margins, putting small and medium chemical fiber firms under pressure.
Meanwhile, end-demand recovery remains uncertain. Export orders are weaker than expected due to global economic slowdown; domestic demand, though stimulated by policies, takes time to transmit to textiles. Thus, the chemical fiber chain will enter a "cost-price" rebalancing phase in the short term.