International crude oil prices have erased all gains from this year's Middle East tensions, with WTI crude recently falling below $70 per barrel. Yet downstream polyester filament yarn prices remain nearly 1,000 yuan per ton higher than before the surge. This divergence is not a simple lag in transmission but the result of deep game-playing across the polyester supply chain over inventories, cash flow, and demand expectations.
Inventory and Operating Rate Divergence Behind the Price Gap
According to public data, current domestic direct-spun polyester filament capacity utilization is around 73.81%, a slight increase of 0.29% from last week. However, over a longer timeframe, this level is at a three-year low. Low operating rates should support prices, but the sharp drop in crude oil broke that logic. PTA and ethylene glycol futures have basically returned to pre-surge levels, but polyester filament prices have been slow to fall due to high factory inventories. Data shows POY factory inventories at about 30 days, FDY at 35.7 days, and DTY as high as 41.8 days.
This puts polyester plants in a dilemma: if they follow raw material price declines, high-cost inventory will realize actual losses; if they maintain prices, they face stagnant sales. Thus, factories choose a strategy of 'slow price cuts, slow sales' to delay realizing floating losses. Weaving mills, on the other hand, seeing ample cash flow in polyester filament and anticipating further downside, adopt a 'buy only when necessary' approach, maintaining only minimal procurement.
Weak Demand as the Root Driver
The root cause of the price gap stalemate is weak end demand. This summer's traditional peak season for sun-protective clothing and other items has yet to materialize, as unseasonably cool weather has dampened consumer impulse. Meanwhile, weak domestic demand combined with slower-than-expected recovery in export orders has kept weaving mill operating rates low, suppressing raw material purchasing intentions.
From a supply chain perspective, polyester plants' production cuts have not materially changed the supply-demand balance. Despite rumors of further cuts by major plants, actual capacity utilization remains above 73%, with no large-scale shutdowns. This means supply-side contraction is limited, while demand lacks elasticity, creating a classic supply-over-demand scenario.
Export Recovery as a Potential Game Changer
The market is not without positives. With the full reopening of shipping lanes through the Strait of Hormuz, global crude oil and commodity trade order is gradually recovering. Several overseas economies are accelerating their recovery, potentially boosting international textile consumption demand. For China's textile export market, subsequent export order increments may partially offset domestic demand weakness, alleviating downward pressure on the polyester filament market.
However, in the short term, the weak supply-demand, high price gap pattern in the polyester supply chain will persist. The tug-of-war between upstream and downstream will continue to dominate market direction, with changes in either side's inventory or operating rates potentially triggering price volatility.