International oil prices have retreated to pre-Middle East crisis levels, but polyester filament yarn prices remain stubbornly high. On June 24, WTI crude briefly fell below $70/barrel, returning to levels seen before the recent escalation in the Middle East. Despite a slight rebound on June 25 due to geopolitical fluctuations, crude was again hovering around $70 on June 26. Meanwhile, polyester filament yarn prices are still nearly 1,000 yuan per ton higher than before the conflict.
What does this price gap mean?
Why is the price transmission stuck?
From the raw material side, futures prices for PTA and MEG have essentially returned to their pre-crisis levels, theoretically removing the cost support for polyester filament. Yet, polyester yarn prices have not followed suit, creating a substantial cash margin for polyester plants. While these margins look attractive on paper, the reality is that the plants' inventories—30 days for POY, 35.7 days for FDY, and 41.8 days for DTY—were produced during a period of high costs. Lowering prices now would turn paper profits into realized losses. With capacity utilization for direct-spun polyester filament at only 73.81%—a three-year low—polyester plants are under no pressure to sell quickly. They prefer to lower prices gradually and sell slowly.
For weaving mills, the situation is the opposite. The high cash margins on polyester yarn strongly suggest that prices have room to fall. Unless they have orders to fulfill, mills see no reason to build inventory when a one-month delay could save hundreds or even thousands of yuan per ton. As a result, weavers have adopted a 'buy-only-when-necessary' approach.
This divergence in expectations between upstream and downstream players has led to shrinking transaction volumes and price stagnation.
Imbalance in supply and demand: weak domestic demand is the core issue
The fundamental driver of the current price divergence is weak domestic demand. Summer is typically the peak season for sun-protective clothing, but unusually cool weather this year has delayed the start of related consumption, directly dragging down demand for polyester filament.
Although capacity utilization is at a three-year low, inventory pressure at polyester plants has not eased. The low operating rate is more a result of voluntary production cuts than a signal of demand recovery. This 'low output, high inventory' pattern indicates that the supply-demand imbalance has not fundamentally improved.
However, there are some bright spots. With the full reopening of shipping lanes through the Strait of Hormuz, global crude oil and commodity trade is gradually normalizing. Several overseas economies are accelerating their recovery, which could boost international demand for textile products. Increased export orders may partially offset the weakness in domestic demand and provide a floor for polyester filament prices.
The standoff continues: price gap repair will take time
In the short term, the pattern of weak supply-demand fundamentals and high price margins in the polyester chain is likely to persist. The tug-of-war between polyester plants and weaving mills will continue to dominate market dynamics. For polyester plants, high inventory costs limit their room to cut prices. For weavers, expectations of further price declines discourage purchasing.
How can this deadlock be broken? Either demand surprises on the upside, absorbing the high inventories, or crude oil prices fall further, forcing polyester plants to lower prices. Neither scenario appears imminent.