After Iran announced a 60-day free transit policy for commercial vessels through the Strait of Hormuz, international oil prices dropped steadily as geopolitical risk premiums faded. This shift quickly rippled through the chemical fiber and textile supply chain, opening a temporary cost repair window for China's industry—though its duration and impact remain subject to multiple variables.
Background
In late June, Iran waived surcharges for commercial ships transiting the Strait of Hormuz, a chokepoint handling roughly one-third of global crude oil shipments. Prior to this, heightened geopolitical tensions had driven up shipping costs and tightened supply. The policy release unleashed pent-up crude capacity, reversing the supply crunch and sending Brent and WTI into a downward trend.
For China's chemical fiber sector, this is directly consequential. The country imports most of its PX, MEG, and methanol from the Middle East. Earlier congestion had delayed shipments and kept feedstock inventories low, inflating procurement costs. Now, with smoother passage and weaker crude support, upstream feedstock prices have softened, offering a rare cost buffer for downstream producers.
Industry Impact
The cost relief is transmitting clearly downstream. As PX and MEG prices eased, major products like polyester, PET, and nylon have stabilized after prolonged declines. Industry data shows that in late June, polyester filament yarn prices in East China narrowed their decline, with some specifications even rebounding slightly—a sign of market optimism over cost improvement.
For textile mills, this window primarily alleviates operational pressure. The first half of the year saw weak order intake, with most mills adopting just-in-time procurement. Lower feedstock costs directly reduce fabric production expenses, helping restore margins that had been squeezed by high input costs and sluggish demand. Some small and medium enterprises have begun restocking, lifting activity across the chain.
Yet this repair is structural, not trend-driven. End-demand recovery remains muted, limiting the ability to pass on cost savings. The response from industrial clusters like Keqiao and Shengze confirms this: inquiry volumes have risen, but actual transactions remain cautious.