Oil Price Plunge 3%: Textile Raw Material Cost Expectations Face Restructuring

Brent crude oil plummeted over 3% in a single day, with WTI crude falling below the $85 per barrel mark—the sharp movement in international oil prices on June 12 is now rippling through the textile supply chain. For an industry reliant on petrochemical-based raw materials like PTA and polyester, this represents not just a cost relief but a potential reshaping of the pricing logic for chemical fibers in the second half of the year.

Background

Closing data for June 12 showed light sweet crude oil futures for July delivery on the New York Mercantile Exchange falling $2.83 to settle at $84.88 per barrel, a decline of 3.23%. Brent crude oil futures for August delivery on the London ICE Futures Exchange fell $3.05 to settle at $87.33 per barrel, a drop of 3.37%. Intraday declines exceeded 5%, with Brent crude hitting a low of $86.76 per barrel.

Direct triggers for the oil price decline included remarks by Donald Trump on Iran, new details of the Iran-US Memorandum of Understanding, and the CME Group's expansion of WTI crude trading hours to a 7×24 model. These factors combined to fuel expectations of looser crude supply.

From an industrial logic perspective, every $1 per barrel drop in oil prices theoretically reduces PTA costs by approximately 35-40 yuan per ton. If oil prices remain low, the cost support for polyester filament yarn and polyester staple fiber will be significantly weakened.

Industry Impact

The first pressure on chemical fiber companies comes from inventory devaluation. Polyester plants that stocked up at high oil prices face book losses if they failed to lock in raw material costs in time. For example, the price of polyester filament yarn POY has a correlation of over 80% with PTA and MEG prices. After the oil price drop, downstream weaving mills may suspend purchases and wait for lower quotes.

The second impact lies in export competitiveness. Export quotes for chemical fiber fabrics and yarns usually reference raw material costs. If domestic chemical fiber prices follow the decline but overseas markets react with a lag, it could temporarily boost the export competitiveness of Chinese textiles. However, Southeast Asian textile mills also benefit from lower oil prices, and the duration of the cost advantage depends on exchange rate trends and logistics efficiency.

For natural fibers like cotton, the impact is more indirect. But since chemical fibers and cotton are substitutes, lower polyester prices may compress pricing space for cotton spinners. This pressure is particularly evident in blended fabrics.

Practical Recommendations

For Buyers - Temporarily slow down procurement of chemical fiber raw materials, waiting for oil prices to stabilize before entering the market to lower costs. - Monitor changes in the basis between PTA futures and spot prices; if the basis widens, consider using point pricing to lock in low-cost supply. - For blended fabric orders, prioritize solutions with higher chemical fiber content to leverage the cost-down window and optimize profit margins.

For Foreign Trade Companies - Adopt floating pricing mechanisms in export quotes, incorporating raw material price fluctuation clauses into contracts to avoid losses from potential oil price rebounds. - Use forward exchange contracts to lock in exchange rates, preventing renminbi appreciation from offsetting the cost advantage gained from lower oil prices. - Monitor the raw material procurement dynamics of Southeast Asian competitors; if local chemical fiber prices drop more sharply, adjust pricing strategies accordingly.