International oil prices have experienced a rare and rapid decline over the past week, with Brent crude falling sharply from its highs and WTI following suit. The trigger was Iran's announcement of a 60-day free passage policy in the Strait of Hormuz, eliminating surcharges for commercial vessels. This strategic waterway, which handles about one-third of global crude oil shipments, had seen shipping costs soar and supply tighten due to geopolitical tensions. The policy shift quickly dissipated geopolitical risk premiums, pushing the oil market from tight to temporarily loose.
For the chemical fiber and textile industry, this change means a significant easing of upstream feedstock cost pressures. Domestic production of PX, MEG, and methanol relies heavily on imports from the Middle East. In recent months, channel congestion led to delayed arrivals, low inventories, and high prices, severely squeezing polyester plant margins. Now, with lower-priced feedstock arriving, PX and MEG prices have softened, and mainstream products like polyester, nylon, and polyester filament have stabilized. The industry finally gets a breather from the squeeze of high costs and weak demand.
Cost Transmission and Market Reaction
The drop in oil prices has transmitted down the chemical fiber chain faster than expected. As upstream feedstock prices eased, polyester plants saw lower procurement costs, and operating rates improved. The industry had long faced high inventories, low profits, and many small and medium enterprises were forced to cut or halt production. Now, with the cost window open, some factories are replenishing feedstock inventories, driving market activity. Public data shows that transaction prices for polyester chips and polyester filament in East China have rebounded slightly in the past week, though the increase is limited, it at least reverses the prolonged decline.
Downstream textile markets benefit concurrently. In the first half of the year, end-user orders were weak, with home textile and apparel companies mainly restocking on a just-in-time basis, and sentiment was cautious. The steady decline in chemical fiber costs directly eases the operating pressure on weaving mills—lower raw material costs for fabric and printing/dyeing plants expand profit margins, boosting restocking willingness. This bottom-up demand is driving a gradual recovery in production and sales across the supply chain. However, it's important to note that the current uptick is more cost-driven inventory restocking than a true recovery in end consumption.
Short-Term Gains and Long-Term Uncertainties
The 60-day free passage policy is essentially a short-term benefit, and market uncertainty remains. Once the policy window ends, the Strait of Hormuz's transit rules and geopolitical situation could tighten again, potentially sending oil prices higher and undermining the cost support for chemical fiber raw materials. This means companies must optimize inventories and repair profits within two months; otherwise, once the benefit fades, the industry will return to the high-cost dilemma.
A more critical issue is end demand. Current recovery in textile and apparel consumption at home and abroad is weak. Restocking demand from European and American markets has not yet kicked off on a large scale, and domestic consumption is growing moderately. Cost benefits can improve corporate profits but cannot create new demand. If end orders do not pick up simultaneously, this cost repair is likely to be a one-time boost, and the industry is unlikely to see a trend reversal. Overall, the market is expected to maintain a mild, volatile, structurally recovering trend, rather than a full turnaround.