Crude oil prices broke below the $70 mark during intraday trading on June 24, returning to pre-Middle East crisis levels. Although a minor rebound occurred on June 25 due to geopolitical fluctuations, oil hovered around $70 again on June 26. Meanwhile, polyester filament prices remain nearly 1,000 yuan per ton higher than before the crisis—a gap that reflects a deep-seated standoff across the industrial chain rather than mere time lag.
Cost and Inventory Misalignment
From a futures perspective, PTA and MEG have essentially fallen back to their starting points before the rally, meaning polyester filament has lost its cost support from raw materials. Yet polyester plants have not followed suit with proportional price cuts. The reason lies in the high production cost of their current inventory. Industry data shows POY factory inventory at 30 days, FDY at 35.7 days, and DTY at 41.8 days—all produced when raw material costs were high. A sharp price reduction would convert paper losses into real ones.
At the same time, polyester filament's cash margin remains substantial. With raw material costs declining but product prices relatively firm, the polyester segment enjoys attractive book profits. However, this very cash margin signals ample room for further price drops, directly influencing weavers' purchasing decisions.
'Buy Only When Necessary' Stalemate
For weaving mills, the thousand-yuan gap between polyester filament and raw material costs, combined with high cash margins, suggests a high probability of further price declines. Unless they have confirmed orders to fulfill, purchasing raw materials for inventory would risk a cost difference of hundreds or even thousands of yuan per ton within a month—while the finished fabric value remains unchanged. Consequently, weavers have adopted a 'buy only when necessary' stance, compressing procurement cycles.
Polyester plants, for their part, are playing for time. With capacity utilization already at near three-year lows (73.81% for direct-spun polyester filament as of June 24, up just 0.29% from the previous week), factories are under no pressure to clear inventory quickly. They prefer gradual price reductions and controlled sales to avoid one-time losses. This strategy has shrunk market volumes, locking the upstream and downstream into a classic buyer-waiting, seller-holding pattern.
Weak Demand as Root Cause, Exports as Wild Card
The fundamental driver of this standoff is weak demand relative to supply, compounded by insufficient domestic consumption. Summer is typically peak season for sun-protective fabrics and garments, but unusually cool weather has delayed order placement well into late June. Weak domestic demand and cautious consumer sentiment have made weavers extremely conservative in raw material procurement.
Yet not all signals are negative. With the full reopening of shipping lanes in the Strait of Hormuz, global crude oil and commodity trade flows are normalizing. Accelerating economic recovery in several overseas markets could boost international textile consumption demand. For Chinese textile exporters, incremental export orders may partially offset domestic pressure and ease downside risks in the polyester filament market.