When WTI crude oil dipped below $70 per barrel on June 24, returning to pre-Middle East crisis levels, polyester filament prices remained nearly 1,000 yuan per ton higher than before the conflict. This is not market mispricing but a rational game between upstream polyester plants and downstream weaving mills over inventory costs, cash flow, and demand expectations.
The Source of the Price Gap
Crude oil, as the upstream feedstock for the polyester chain, typically transmits price changes quickly. However, industry data shows that on June 24, the capacity utilization rate of domestic direct-spun polyester filament units was 73.81%, up 0.29% from the previous week. This operating rate, though at a three-year low, did not drop sharply with oil prices.
Polyester plants are constrained by inventory costs. Current inventory levels stand at 30 days for POY, 35.7 days for FDY, and 41.8 days for DTY. These inventories were produced when raw material costs were much higher than current spot prices. A sharp price cut would turn paper losses into real losses. With low operating rates, plants have no urgent need to sell and prefer gradual price reductions.
Meanwhile, PTA and ethylene glycol futures have essentially returned to pre-rally levels, giving polyester filament a substantial paper cash flow. For weaving mills, this high cash flow signals further downside potential. Unless they have orders to fulfill, delaying purchases by one month could save hundreds or even thousands of yuan per ton on raw materials, with no difference in the final product.
The Upstream-Downstream Stalemate
This price gap has fostered a 'buy only when necessary' mentality among weaving mills, which are deferring raw material purchases and maintaining minimal inventories. Polyester plants, in turn, are slowly reducing prices while trying to support prices through production cuts.
Supply-demand imbalance is the root cause. By late June, unusually cool weather in many parts of China delayed the summer sunscreen apparel season, which typically starts before July. This weakened domestic demand and reduced mills' restocking appetite. While foreign trade is showing signs of recovery—the full reopening of the Strait of Hormuz shipping channel is restoring global crude and commodity trade, and multiple overseas economies are accelerating—the positive impact on domestic polyester purchases will take time to materialize.
Industry Impact and Outlook
The polyester chain currently exhibits a typical 'weak supply-demand, wide price gap' pattern. For polyester plants, high inventories and low operating rates limit their ability to cut prices sharply, but prolonged weak demand will eventually force them to reduce prices. For weaving mills, deferring purchases lowers raw material costs but risks supply availability when orders need to be fulfilled.
This price gap is expected to narrow over the next one to two months. If the Middle East situation does not escalate and crude oil remains low, falling PTA and ethylene glycol prices will eventually squeeze polyester filament's cash flow. Conversely, as summer apparel orders gradually release and foreign trade orders recover, weaving mills' restocking demand may pick up in July-August, easing inventory pressure on polyester plants.