When international crude oil quietly fell back to its early-year level, the polyester chain did not follow suit. On June 24, WTI crude briefly dipped below $70/barrel, erasing nearly all gains from the Middle East crisis. Yet in the polyester filament market, prices remain nearly 1,000 yuan/ton higher than pre-conflict levels. This 'scissors gap' is pushing upstream and downstream players into a new game of chicken.
The Crude-Polyester Divergence
Crude oil is the starting point of the polyester chain, and its price moves usually transmit to PTA, MEG, and then to polyester filament within days. But this time, the transmission chain has stalled. As of June 24, PTA and MEG futures had fully given back the geopolitical premium, returning to pre-crisis levels. However, spot polyester filament prices still stand about 1,000 yuan/ton higher.
This divergence is no accident. Polyester plants aggressively raised filament prices during the oil rally, building up substantial cash margins. But when crude crashed, the cost support quickly evaporated. Filament prices, however, are being propped up by high inventory costs and reluctance to cut. According to Longzhong data, the operating rate of direct-spun polyester filament was only 73.81% on June 24, up slightly by 0.29% from the prior week but still near a three-year low.
Low operating rates should ease inventory pressure, but reality is different. POY inventory stands at 30 days, FDY at 35.7 days, and DTY at 41.8 days. This means plants are producing at higher current costs while sitting on large stocks made from earlier high-cost raw materials. Cutting prices would immediately turn paper losses into real ones.
Weaving Mills: 'Buy Only When Necessary'
For weaving mills, the high cash margin of polyester filament looks like a red flag. Since raw material costs have already fallen, there is clearly room for filament prices to drop further. Buyers are becoming increasingly cautious: unless they have orders that must be delivered, they prefer to delay purchases rather than risk paying hundreds or even thousands of yuan more per ton for inventory.
This 'buy-only-when-necessary' strategy has directly depressed market activity. Despite production cuts, polyester plants are forced to slow the pace of price reductions. Over the past week, only minor cuts of 50-150 yuan/ton were seen, far from what weavers expect. Liquidity in the chain is tightening.
Weak Domestic Demand and the Export Wildcard
Behind the supply-demand mismatch lies a broader issue: weak domestic demand. Summer is normally peak season for seasonal fabrics like sun-protection clothing, but unusual weather has kept temperatures cool well into late June, delaying the seasonal consumption pickup and further curbing weavers' restocking appetite.
However, the external environment is improving. With the Strait of Hormuz shipping channel fully reopened, global crude and commodity trade flows are gradually normalizing. Multiple overseas economies are accelerating recovery, which should boost international textile consumption. For export-dependent domestic textile firms, this may offer a window to offset weak domestic demand.
The Game Continues: Where Next?
In the near term, the polyester chain's 'weak supply-demand, wide price gap' pattern is likely to persist. Polyester plants hold high inventories and cash margins but are unwilling to cut prices first. Weavers hold orders but delay purchases, waiting for lower costs. Both sides are waiting for the other to blink.
Oil prices are oscillating around $70, with Middle East risks still present, but market expectations for the cost side have stabilized. The real driver for the next phase will be the pace of end-demand recovery—especially whether export orders can generate meaningful volume in Q3 and Q4.