On June 26, international crude oil markets experienced their largest single-day sell-off this year. WTI crude for August delivery on NYMEX settled at $69.23/barrel, down $2.69 or 3.74%, while Brent crude fell 3.27 to close at $71.99, a decline of 4.34%. During the session, WTI briefly broke below $68, and Brent touched a low of $72.17 before a slight late-session bounce, but the overall bearish trend was clear.
Cost Transmission: From Crude to Polyester
Crude oil is the anchor cost for the entire chemical fiber chain. Industry experience shows that every $1/barrel move in WTI affects PTA production costs by about 35-40 yuan/ton. Based on the $2.69 drop in WTI, PTA theoretical costs should fall by 95-110 yuan/ton. This is direct transmission only; considering margin compression in the PX stage, the actual impact could be larger.
Polyester filament yarn, the most important raw material for woven fabrics, is highly correlated with PTA. Current mainstream quotes for polyester POY 150D/48F in Jiangsu and Zhejiang are in the 7300-7500 yuan/ton range, already at a three-month low. The crude crash means cost support is further weakening, eroding the pricing power of polyester plants.
Industrial Cluster Reaction: Weaving Mills Turn More Cautious
Greige fabric inventories in major weaving clusters such as Shengze, Changxing, and Xiaoshan are generally at 30-40 days, with no clear recovery in end-use garment orders. In a downward raw material price channel, weaving mills generally adopt a hand-to-mouth buying strategy to avoid holding depreciating inventory. The crude crash will reinforce this wait-and-see attitude.
Historically, when WTI breaks below $70 and persists in the $68-70 range, polyester plant cash flows deteriorate rapidly, and some small and medium-sized plants may be forced to cut production or schedule maintenance. A similar situation occurred in Q4 2023, when the polyester operating rate fell from 92% to around 86%, directly triggering a temporary bottom in polyester yarn prices.
Foreign Trade and Exchange Rates: Can Cost Pass-Through Boost Competitiveness?
For export-oriented textile trading companies, lower raw material costs theoretically mean greater pricing flexibility. However, the current RMB/USD exchange rate is fluctuating in the 7.25-7.30 range, partially offsetting the cost-side benefit. Meanwhile, destocking in European and American markets is not yet complete, and brand buyers remain cautious with order volumes.
A noteworthy variable is that the Brent-WTI spread narrowed to $2.76 on the 26th, below the recent average. This reflects growing market concern about global oversupply—OPEC+ production increase expectations combined with rising US shale output are capping upside for oil.
Practical Recommendations
For Procurement Teams - If WTI remains below $70, shift PTA and polyester procurement from weekly replenishment to daily price inquiries to capture low-price windows during sharp drops. - Monitor polyester plant operating rate weekly reports; once the load drops below 88%, consider increasing raw material safety stock by 1-2 weeks.
For Foreign Trade Companies - Use the cost-down window to proactively offer FOB price reductions to European and American clients to secure Q3 orders. - When signing forward contracts, consider adding a raw material price fluctuation clause linking PTA prices to finished product unit prices to hedge against future oil price rebounds.
In summary, the June 26 crash is not an isolated event. It combines three pressures: weak macro demand, rising supply expectations, and declining risk appetite in financial markets. For the textile industry, this is both a cost-side stress test and an opportunity to reassess procurement strategies and inventory management.