Crude oil prices have fallen back to levels seen before the escalation of the Middle East crisis, yet polyester filament yarn prices remain nearly 1,000 yuan per tonne higher. This price gap is tearing apart the upstream-downstream relationships across the entire polyester chain.
The Logic Behind the Price Gap
On June 24, U.S. WTI crude oil futures briefly dipped below $70 per barrel, returning to the level before the recent geopolitical premium emerged. Although a modest rebound occurred on June 25 due to renewed tensions in the Middle East, prices hovered around $70 again by June 26. This means that from a raw material cost perspective, the upstream support for polyester filament yarn has significantly weakened.
However, polyester yarn prices have not followed suit. According to industry public data, current polyester filament yarn prices remain about 1,000 yuan per tonne higher than before the escalation of the Middle East crisis. This disconnect is no coincidence.
Polyester plant capacity utilization is now at a three-year low—on June 24, the utilization rate for domestic direct-spun polyester filament yarn equipment was 73.81%, up only 0.29% from the previous week. Low operating rates should theoretically mean reduced supply, but plant inventory pressure has not eased: POY inventory stands at 30 days, FDY at 35.7 days, and DTY as high as 41.8 days. High inventories combined with high cash flow have placed polyester plants in a dilemma.
Upstream-Downstream Bargaining and Wait-and-See
For weaving mills, the current high cash flow of polyester yarn implies significant room for future price declines. If it's only about replenishing routine stock rather than filling urgent orders, delaying purchases could save hundreds or even thousands of yuan per tonne. This expectation has directly led to a 'buy-only-when-necessary' procurement strategy, further suppressing actual demand for polyester yarn.
For polyester plants, while the paper cash flow looks attractive, the production cost of existing inventory is not low. Selling at a discount now would turn unrealized losses into real ones. With low operating rates, plants have no urgency to offload large volumes, preferring a strategy of 'slow price cuts, slow sales'.
At the heart of this standoff is supply-demand imbalance. Weak demand amid strong supply and insufficient domestic consumption are common pain points in China's consumer market, and the polyester chain is just one example.
Seasonal Demand and External Variables
Summer is typically the peak season for lightweight fabrics like sun-protective clothing, but unusually cool weather this year has delayed the related market uptick. This has directly weakened the seasonal restocking demand that usually occurs.
However, not all is bleak. With the full reopening of the Strait of Hormuz shipping lane, global crude oil and commodity trade order is gradually stabilizing. Faster economic recovery in several overseas economies is expected to boost international textile consumption demand. For domestic textile exporters, incremental export orders may partially offset the pressure from weak domestic demand, providing a bottom for the polyester filament yarn market.