International oil prices have fallen back to pre-crisis levels, but polyester filament yarn prices remain nearly 1,000 yuan per ton higher, creating a rare premium and a standoff between upstream and downstream.
The Premium Puzzle
On June 24, U.S. WTI crude oil futures briefly dipped below $70 per barrel, returning to levels seen before the escalation of Middle East tensions. Although prices rebounded slightly on June 25 due to renewed regional volatility, they hovered around $70 again on June 26. Meanwhile, polyester filament yarn prices remain nearly 1,000 yuan per ton above pre-crisis levels, forming an unusual gap.
From the futures market perspective, PTA and MEG prices have largely returned to pre-rally levels, which means polyester filament's current paper cash flow is quite attractive. However, for weaving mills, high cash flow also signals significant room for future price declines. If purchases are made only for inventory rather than for delivery orders, delaying procurement by one month could save hundreds or even thousands of yuan per ton of raw material, while the final product remains identical. As a result, weaving mills have entered a "no-buy-unless-necessary" mode.
Polyester Mills' Dilemma
Despite favorable paper margins, polyester mills face real pressure. Current inventory levels stand at 30 days for POY, 35.7 days for FDY, and 41.8 days for DTY. Selling these high-cost stocks at current low prices would turn paper losses into real losses. With operating rates at only 73.81%, polyester mills have no urgent need to offload inventory and prefer a slow price decline strategy.
Data shows that on June 24, domestic direct-spun polyester filament operating rates actually edged up 0.29% from the previous week. However, over a longer timeframe, current capacity utilization remains near a three-year low. Although low operating rates help control inventory, they cannot offset the price pressure from the oil price collapse. On June 24, some polyester mills reduced filament prices by 50-150 yuan per ton, but the cuts are far from meeting weavers' expectations.
Structural Imbalance
The core issue is supply-demand imbalance and weak domestic demand. Summer is typically peak season for sun-protection fabrics, but unusually cool weather has delayed the seasonal uptick, further suppressing downstream buying interest.
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. Faster economic recovery in several overseas economies could boost international textile demand. Export order growth may partially offset domestic weakness, providing some support to the polyester filament market.
Near-Term Stalemate
In the short term, the pattern of weak supply-demand dynamics and high price spreads is likely to persist. The tug-of-war between upstream and downstream will dominate market direction: polyester mills are reluctant to cut prices aggressively, while weaving mills insist on waiting for lower levels. Both sides are testing each other's patience. Price gap correction will require either a meaningful demand recovery or forced concessions from the polyester sector.