In mid-June, PTA futures plunged over 400 points in a single day, dragging the entire polyester chain down 4.2%. Yet polyester filament yarn only dropped 50-100 yuan per ton, and downstream weavers collectively held back, pushing the sales-to-production ratio to a mere 30%. Polyester mills, armed with low inventory and a 74% capacity utilization rate, refused to panic-sell, opting for a 'gradual decline' strategy to buy time. This tug-of-war between upstream and downstream is rewriting the price logic of the off-season.
Upstream Crash Meets Downstream Cold Shoulder
On June 15, PTA futures tumbled over 400 points, followed by ethylene glycol the next day, erasing all risk premiums accumulated after the Hormuz Strait blockade. By June 16, PTA futures were hovering near 5,800 yuan per ton. Logically, a sharp drop in raw material costs should trigger downstream bargain hunting, but weavers didn't bite. Polyester filament yarn sales-to-production ratio stayed around 30%, with most mills waiting for lower prices.
This cold shoulder has two drivers: first, it's the traditional off-season for textiles, with sparse end orders reducing the urgency to replenish; second, polyester yarn's decline lagged far behind upstream—while cash flow has recovered, absolute prices remain above downstream expectations. Weavers' calculus is clear: the more upstream falls, the more room polyester yarn has to drop. Buying now would be like catching a falling knife.
Polyester Mills' 'Time for Space' Strategy
Facing downstream hesitation, polyester mills avoided deep cuts, opting instead for a 'drip decline.' This strategy is backed by eased inventory pressure. As of June 11, POY inventory stood at 24.3 days, FDY at 28.1 days, and DTY at 34.7 days, down 10-20% from a week earlier. The previous week, daily polyester yarn sales-to-production briefly exceeded 400%, with some mills hitting 1,000%, effectively digesting stock.
Meanwhile, capacity utilization has dropped to 74%, below Chinese New Year levels. Multiple production cuts kept supply tight, preventing inventory from piling up. The mills' logic: if cutting production leads to price drops, and not cutting also leads to drops, then cutting is still better to defend the price floor. This means polyester yarn prices won't crash but will grind lower by 50-100 yuan per day, slowly aligning upstream and downstream expectations.
Crude Oil and Geopolitical Wildcards
The easing of Iran tensions triggered the polyester chain's plunge. On June 16, Iran reported that three oil tankers and two cargo ships had passed through the Hormuz Strait despite US blockade, with US officials confirming increased shipping activity. However, Israel's dissatisfaction with the US-Iran deal and its continued offensive in Lebanon keep the situation fluid. The deal is only a memorandum of understanding, lacking enforcement power, and implementation will take time.
From crude's perspective, oil was around $70/barrel before the war and now sits near $75. Given massive restocking demand from countries with depleted reserves in coming months, further downside is limited. Once markets digest recent news, crude should stabilize, and polyester yarn will then enter a true bottoming phase.