60-Day Free Passage in Hormuz Strait: Cost Relief for Chemical Fiber Textiles, but Demand Remains Key Variable

International oil prices have seen a notable correction over the past week, with Brent and WTI futures declining steadily. The trigger was Iran's official announcement of a 60-day free passage policy in the Strait of Hormuz, canceling surcharges for commercial vessels. This move unclogged a key channel carrying about one-third of global crude oil, quickly dissipating geopolitical risk premiums and releasing pent-up crude shipping capacity, thereby easing supply tightness.

For China's chemical fiber industry, which relies heavily on imported raw materials from the Middle East, this represents a timely cost relief. Prices of core chemical raw materials such as PX, MEG, and methanol have softened, alleviating the previous situation of low inventory and high prices caused by channel congestion. Industry data show that chemical fiber companies have been under profit pressure for months, with conservative operating rates and high inventories. Now, with upstream cost support weakening, profit margins are showing signs of recovery.

Cost Transmission and Industry Chain Response

The impact of lower oil prices is cascading down the chemical fiber supply chain. Mainstream products like polyester, nylon, and polypropylene have stabilized after a prolonged period of high costs and weak demand. China Customs data indicate that imports of chemical fiber raw materials in the first half of the year declined year-on-year, constrained by high prices and shipping disruptions. With the channel now open and low-cost materials arriving at ports, companies are increasing restocking, and market sentiment is improving.

Downstream textile markets are also benefiting. In the first half, end-user orders were sluggish, with most companies purchasing only for immediate needs. The decline in chemical fiber costs has eased the operational pressure on small and medium-sized textile firms, prompting some to increase raw material purchases and boosting production and sales across the chain. Home textiles and apparel segments now have room for promotional discounts, supporting consumption. However, the recovery in end demand remains weak, and cost benefits alone cannot drive a broad industry rally.

Short-Term Gains and Medium-Term Risks

The shipping policy is only valid for 60 days, leaving market uncertainty unresolved. After the window closes, channel rules and geopolitical dynamics could shift again, reigniting oil price volatility. Industry analysts note that the chemical fiber textile market is in a bottoming and repair phase. In the short term, companies can leverage cost advantages to optimize inventory and repair profits, but medium-term trends hinge on three key variables: crude oil price direction, geopolitical developments, and substantive end-demand recovery.

From an industrial cluster perspective, companies in major textile hubs like Keqiao (Zhejiang) and Shengze (Jiangsu) are cautiously optimistic. Some are using the low-cost raw material window to restock, but large-scale capacity expansion is not expected. The market is likely to see a gradual, structural recovery rather than a V-shaped rebound.

Practical Recommendations

For Purchasers - Take advantage of the current low raw material prices to increase procurement of key chemical fiber inputs (e.g., PX, MEG) to lock in cost benefits for the next 1-2 months. - Monitor geopolitical developments closely and prepare inventory buffers before the 60-day policy expires to avoid supply disruptions. - Negotiate short-term floating-price contracts with suppliers to benefit from further oil price declines.

For Foreign Trade Enterprises - Use the cost reduction to adjust export pricing, offering more competitive quotes to win orders, especially in Southeast Asian and South Asian markets. - Track RMB exchange rate movements alongside oil price trends to assess export margins and avoid currency risks eroding cost advantages. - Communicate the current raw material cost advantage to clients to secure long-term orders or pre-book partial order volumes for the second half of the year.