Crude oil has tumbled back to pre-crisis levels, but polyester filament still commands a premium of nearly RMB 1,000 per ton. On June 24, U.S. WTI crude futures briefly dipped below $70, returning to levels seen before the latest Middle East tensions escalated. Although a modest rebound occurred on June 25 due to renewed geopolitical concerns, oil prices hovered near $70 again on June 26. Meanwhile, polyester filament prices remain about RMB 1,000 higher than before the rally, creating a delicate standoff across the polyester supply chain.
Root Causes: High Inventories Meet Low Operating Rates
On the production side, polyester plants are not idle. According to Longzhong data, on June 24, the capacity utilization rate for domestic direct-spun polyester filament stood at 73.81%, up only 0.29% from the previous week. However, over a longer horizon, this rate is at a three-year low. Low operating rates should theoretically support prices, but the crude oil crash dragged down PTA and MEG futures, removing cost support for polyester filament. On June 24, some polyester mills cut filament prices by RMB 50-150 per ton, but weavers saw these cuts as insufficient.
Inventory data reveals the dilemma: POY inventory at 30 days, FDY at 35.7 days, and DTY at 41.8 days. While current paper margins for polyester filament look attractive, the actual cost of existing inventory was locked in during high oil prices. Aggressive price cuts would turn unrealized losses into real ones, while maintaining high prices pushes weavers into a "wait-and-see" mode, with many adopting a "no buy unless necessary" policy. This standoff is the core reason the price gap has been slow to narrow.
Demand Side: Weak Domestic vs. Export Bright Spot
The fundamental issue is weak demand amid ample supply, with domestic consumption being the biggest pain point. Summer is typically peak season for sun-protective clothing, but unusually cool weather through late June has delayed related fabric orders. Weavers generally follow a "buy on rising prices, not falling" mentality, and unless they have urgent orders, they prefer to produce for inventory rather than stock raw materials at high prices. A one-month delay in purchasing could save hundreds or even thousands of yuan per ton in raw material costs, with no change in final product selling prices.
However, the outlook is not entirely bleak. With the Strait of Hormuz fully reopened for shipping, global crude and commodity trade is gradually normalizing. Multiple overseas economies are accelerating recovery, which could boost international textile consumption demand. For China's textile export market, incremental export orders may partially offset the domestic weakness and ease downward pressure on polyester filament. But this transmission takes time, and domestic demand will remain the dominant factor in the near term.
Upstream-Downstream Game: Cash Flow vs. Expectations
The tug-of-war between polyester mills and weavers is essentially a battle between cash flow and price expectations. For polyester mills, with low operating rates, the urgency to sell is limited. They prefer to "cut prices slowly, sell slowly," buying time to avoid one-time losses. For weavers, the high margins on polyester filament imply significant room for future price drops, making waiting the most rational choice. This impasse leads to thin trading volumes and distorted price signals.
From a cost perspective, PTA and MEG futures have already returned to pre-rally levels, weakening theoretical cost support for polyester filament. Yet actual prices remain nearly RMB 1,000 higher. Whether this gap persists depends on how quickly polyester mills can reduce inventory and whether weavers eventually start restocking. If export orders materialize in July-August, they could break the deadlock and push polyester filament prices gradually toward cost levels. Conversely, if domestic demand stays sluggish, polyester mills may eventually be forced to concede, accelerating the narrowing of the price gap.