Crude oil has fallen back to pre-Middle East crisis levels, yet polyester filament yarn prices remain nearly 1,000 yuan per ton higher. This divergence is straining the fragile balance of the polyester supply chain.
Crude Returns to Baseline, Yarn Premium Persists
On June 24, WTI crude briefly dipped below $70/barrel, fully erasing all gains accumulated since the onset of regional tensions. Although a modest rebound occurred on June 25 due to renewed geopolitical uncertainty, by June 26 prices were once again hovering near the $70 threshold. All the conflict-driven premium in crude has now been eliminated.
Polyester filament yarn, however, has not followed suit. Compared to pre-crisis levels, current yarn prices remain nearly 1,000 yuan per ton higher. While PTA and MEG futures have essentially returned to their starting points, yarn cash flow remains exceptionally high. Behind this price gap lies a tug-of-war between polyester mills and weaving enterprises over inventory, operating rates, and market psychology.
Low Operating Rates, High Inventory Burdens
Polyester mills have indeed been controlling supply. Industry data shows that on June 24, domestic direct-spun polyester filament yarn capacity utilization stood at 73.81%, a marginal 0.29% increase from the prior week. But over a longer timeframe, this operating rate is near a three-year low. Low utilization has helped mills keep inventory manageable, but has not reversed the downward price pressure.
Inventory figures tell another story: POY mill inventory is around 30 days, FDY about 35.7 days, and DTY as high as 41.8 days. The production cost of this inventory is significantly higher than current raw material costs. For polyester mills, cutting prices would turn paper losses into real losses. With low operating rates, they have little urgency to clear stock, preferring a slow downward price trajectory.
Weavers Go 'Buy Only When Necessary,' Weak Demand Core Issue
Weaving enterprises see things differently. High yarn cash flow implies substantial room for future price declines. For a weaving mill, buying a month earlier could mean a cost difference of hundreds or even over a thousand yuan per ton, while the final product sells at the same price. Unless they have orders to fulfill, most weavers have adopted a 'buy only when necessary' stance.
The core driver of this supply chain divergence is a weak demand environment. Domestic consumption remains the primary pain point, exacerbated this year by unusually cool weather that has delayed the peak season for summer sun-protective apparel, further suppressing downstream fabric demand.
Export Orders as the Only Cushion
Not all is bleak. With the Strait of Hormuz shipping channel fully open, global crude and commodity trade flows are normalizing. Several overseas economies are accelerating recovery, potentially boosting international textile demand. Increased export orders could partially offset domestic weakness and provide a floor for polyester filament yarn prices.
However, the transmission from exports takes time. In the near term, the pattern of weak supply-demand dynamics and high price spreads is expected to persist. The tug-of-war between upstream and downstream will continue to dominate price direction. Convergence of yarn prices toward crude is a matter of when, not if, with the pace depending on polyester mill production cuts and weavers' restocking decisions.