International oil prices experienced a notable correction in late June, with Brent and WTI crude futures declining steadily. The direct catalyst was Iran's announcement of a 60-day free transit policy for the Hormuz Strait, eliminating commercial vessel surcharges. This core waterway, carrying about one-third of global crude oil shipments, saw its transit costs drop sharply, geopolitical risk premiums fade quickly, and accumulated crude oil capacity release, reversing the tight supply situation.
Cost Transmission Chain: From Crude Oil to Chemical Fiber Raw Materials
The oil price decline rapidly transmitted to the upstream of the chemical fiber industry chain. China's chemical fiber raw materials heavily rely on imports from the Middle East. Earlier channel congestion had kept inventories of core raw materials like PX, ethylene glycol, and methanol low and prices high, compressing corporate profit margins. Now, with the channel clear and low-cost raw materials arriving, coupled with weakening crude oil cost support, upstream raw material cost pressures have significantly eased.
- PX price declines directly reduce PTA production costs
- Increased ethylene glycol imports ease domestic supply tightness
- Methanol, as a cross-product between coal and oil chemicals, benefits from the cost side
This means that the dual dilemma of "high costs and weak demand" that has plagued the chemical fiber industry over the past year is now loosening on the cost side. Mainstream chemical fiber products like polyester, nylon, and spandex have stabilized, and market trading sentiment has improved.
Downstream Response: Restocking Picks Up, But Demand Remains Weak
In the first half of the year, textile end-users struggled with order intake, with companies mainly purchasing on a just-in-time basis amid strong wait-and-see sentiment. As chemical fiber costs steadily decline, small and medium-sized textile enterprises have noticeably increased their restocking enthusiasm, driving production and sales recovery across the entire chain. End-use sectors like home textiles and apparel also gain room for promotional discounts, helping to boost consumption.
However, it must be noted that the recovery momentum for both domestic and foreign textile demand remains weak, with limited incremental orders. The cost dividend is more reflected in inventory optimization and profit repair rather than demand-driven growth. The overall industry remains in a bottoming and repair cycle, lacking the foundation for a sharp rebound.
Limited Window: Uncertainty After 60 Days
This transit benefit is only a short-term policy, and market uncertainty is significant. After the 60-day window closes, the transit rules and geopolitical situation in the Hormuz Strait may change, potentially causing oil price fluctuations again. Chemical fiber and textile companies need to recognize:
- The current cost repair window is temporary and cannot be relied upon sustainably
- Geopolitical risks are not eliminated, only temporarily suppressed
- The pace of end-demand recovery is key to determining the medium-to-long-term trend
The industry is likely to maintain a trend of mild volatility and steady repair. Companies should seize the window to accelerate destocking and optimize cash flow, while preparing risk contingency plans for the policy's expiration.