Crude oil prices briefly fell below $70 per barrel on June 24, returning to levels seen before the recent escalation in the Middle East. Although prices rebounded slightly on the 25th due to geopolitical factors, they hovered around $70 again on the 26th. Meanwhile, domestic polyester filament yarn prices remain nearly 1,000 yuan per ton higher than before the conflict. This price gap reflects a deep tug-of-war along the supply chain amid supply-demand imbalances.
Sources of the Price Gap: Low Capacity Utilization vs. High Inventories
On the cost side, PTA and MEG futures have largely fallen back to pre-rally levels. Yet spot polyester filament prices have not followed suit, maintaining healthy cash margins. Data shows that on June 24, domestic direct-spinning polyester filament capacity utilization was only 73.81%, a three-year low for the period, up just 0.29% from the previous week. Low operating rates imply supply contraction, but polyester plants face high inventory: POY 30 days, FDY 35.7 days, DTY 41.8 days.
This means current production costs are high; aggressive price cuts would turn unrealized gains into actual losses. With low capacity utilization, plants have no urgency to sell, preferring a strategy of gradual price reductions and slow sales to buy time.
Downstream Caution: 'Buy Only When Necessary' Logic
For weavers, high cash margins on polyester yarn signal significant room for further price declines. Unless they have confirmed orders, purchasing raw materials for stock risks a cost difference of hundreds of yuan per ton within a month, while final product prices remain unchanged. Thus, weavers have adopted a 'buy only when necessary' stance, significantly slowing procurement.
This mentality exacerbates market imbalance. Polyester plants have made limited price cuts—50-150 yuan/ton on June 24—which weavers consider insufficient. The standoff between upstream and downstream continues, with thin trading volumes.
Core Issue: Supply Surplus and Weak Domestic Demand
The fundamental driver of this price divergence is supply exceeding demand and weak domestic consumption. Summer categories like sun-protective fabrics should be in peak season, but unusually cool weather through late June has delayed order launches. Weak domestic demand directly suppresses weavers' purchasing appetite.
However, not all is bleak. With the Strait of Hormuz shipping channel fully reopened, global crude and commodity trade is normalizing. Faster economic recovery in several overseas economies could boost international textile demand. Export orders may partially offset domestic weakness, providing support for polyester filament markets.