On June 24, WTI crude oil futures briefly dipped below $70 per barrel, returning to levels seen before the recent escalation in the Middle East. Although prices recovered slightly on June 25 due to renewed geopolitical tensions, by June 26 crude was again hovering near $70. Yet polyester filament yarn (POY, FDY, DTY) prices remain about 1,000 yuan per tonne above their pre-crisis baseline. This divergence between crude and downstream chemical fiber prices is triggering ripple effects across the supply chain.
The Time Lag Between Oil and Polyester Yarn
Crude oil has largely erased all gains from this year's geopolitical conflicts, but polyester yarn prices have not followed suit. On the futures side, PTA and MEG have essentially returned to their starting points, meaning polyester yarn's cash margin is currently quite attractive on paper. However, for polyester plants, this apparent high cash margin does not translate into real profit. Current inventory levels stand at 30 days for POY, 35.7 days for FDY, and 41.8 days for DTY. These stocks were produced using higher-cost raw materials, so any significant price cut would turn paper losses into realized losses.
Against a backdrop of low operating rates, polyester plants have no urgent need to destock. As of June 24, the capacity utilization rate for domestic direct-spun polyester filament yarn stood at 73.81%, up just 0.29% from the previous week. Over a longer timeframe, this operating rate is at a near-three-year low. The strategy adopted by polyester mills is "slow price cuts, slow sales" – controlling supply pace to delay the speed of price declines.
The Weaver's Wait-and-See Logic
In contrast to polyester plants' defensive pricing, weaving mills are actively tightening their purchasing pace. For fabric manufacturers, polyester yarn still has about 1,000 yuan per tonne of downside room. A one-month difference in raw material procurement timing could mean a cost gap of several hundred to over a thousand yuan per tonne. If they buy ahead just to build routine inventory, they risk selling finished goods at prices that cannot keep pace with falling input costs. Consequently, the market has entered a "buy only if necessary" state – weavers are only purchasing for confirmed orders, preferring to wait for lower entry prices.
This tug-of-war between upstream and downstream is essentially a bet on who will blink first. Polyester plants are fortifying their position with low operating rates and high inventory costs, while weavers are using order lead times and inventory cycles as leverage. Both sides are waiting for the other to make the first move, and this deadlock is unlikely to break in the short term.
Weak Demand at the Core
Behind the surface-level divergence in the supply chain lies a fundamental contradiction: supply exceeds demand, and domestic demand is weak. Summer is normally the peak season for seasonal fabrics like sun-protection clothing, but this year's abnormally cool weather has delayed the start of this seasonal demand, and end-use orders have been slow to materialize.
However, not all signals are negative. With the full reopening of the Strait of Hormuz shipping channel, global crude oil and commodity trade flows are gradually normalizing, and economic recovery in several overseas economies is accelerating. The textile export sector may benefit from recovering external demand, and incremental export orders could partially offset domestic weakness, easing downward pressure on polyester yarn prices. But this transmission takes time. In the near term, the pattern of weak supply-demand fundamentals and high price spreads will persist.