International crude oil has fallen back to levels seen before the escalation of the Middle East crisis, yet polyester filament yarn (PFY) prices remain nearly 1,000 yuan per ton higher. This price gap is not merely a delayed cost pass-through but a deep strategic standoff between upstream polyester mills and downstream weaving mills.
Oil Returns to Pre-Crisis Level, PFY Lags Behind
On June 24, U.S. WTI crude futures briefly dipped below $70 per barrel, returning to the level before the latest Middle East tensions. Although prices rebounded slightly on June 25 due to renewed geopolitical concerns, they again hovered near $70 on June 26. Meanwhile, PFY prices have remained stubbornly high, with the gap to pre-crisis levels still around 1,000 yuan per ton.
On the feedstock side, PTA and MEG futures have essentially returned to their starting points, implying that PFY producers are currently enjoying substantial cash margins. Industry data suggests that the theoretical profit margin for PFY is quite attractive, leaving room for price reductions.
However, polyester mills have not opted for aggressive price cuts. On June 24, only minor reductions of 50-150 yuan per ton were observed, far below market expectations. The reason lies in inventory cost structure: current POY inventories stand at about 30 days, FDY at 35.7 days, and DTY as high as 41.8 days. These stocks were produced using high-cost raw materials, and a sharp price cut now would turn paper losses into real losses.
The Cash Flow vs. Inventory Paradox
For weaving mills, the high cash margin of PFY signals a high probability of future price declines. In the current off-season, order volumes are limited, and mills have adopted a 'buy-only-when-necessary' approach. Unless they have urgent orders to fulfill, purchasing raw materials for inventory could mean a cost difference of hundreds of yuan per ton within a month, while the final product sells at the same price.
Polyester mills face a dilemma: price cuts accelerate loss realization, while holding prices slows sales. With capacity utilization at a three-year low (around 73.8%), mills are under no urgent pressure to destock. This stalemate has decoupled PFY prices from crude oil movements.
Rumors of major polyester producers deepening production cuts have circulated, but data from Lonon shows that direct-spun PFY capacity utilization actually increased by 0.29% week-on-week on June 24. The credibility of such rumors remains questionable, likely reflecting short-term market sentiment rather than real supply adjustments.
Oversupply Meets Weak Demand: Domestic Lull and Export Hope
The fundamental driver of this divergence is structural oversupply and weak domestic demand. Summer is typically a peak season for sun-protective apparel, but unusually cool weather has delayed the seasonal boost, further suppressing end-use consumption.
However, not all is bleak. The full reopening of the Strait of Hormuz shipping lanes is gradually restoring global crude and commodity trade flows. Several overseas economies are accelerating their recovery, which could boost international textile demand. Export orders may partially offset domestic weakness, providing a cushion for PFY prices.
In the near term, the pattern of weak supply-demand balance and wide price gaps is expected to persist. The tug-of-war between upstream and downstream players will continue to dominate market dynamics, and meaningful price convergence will require either a significant demand pickup or a proactive inventory adjustment by polyester mills.