Crude oil futures have returned to pre-Middle East conflict levels, but polyester filament remains nearly 1,000 yuan per ton more expensive. This spread is not a simple cost-pass-through failure but a stalemate between upstream cash flow and downstream inventory pressure.
On June 24, WTI crude briefly dipped below $70, and hovered near that mark again on June 26, erasing all geopolitical premiums. Yet spot polyester prices have not followed suit. Current POY, FDY, and DTY prices are still about 1,000 yuan higher than before the conflict. While PTA and MEG futures have largely given back gains, polyester filament remains elevated, creating a rare cash flow window.
The Cash Flow Paradox
For polyester plants, paper margins look attractive given current raw material costs. However, these margins mask a problem: existing inventory was produced with higher-priced inputs. Current inventory levels stand at 30 days for POY, 35.7 days for FDY, and 41.8 days for DTY. Cutting prices now would turn paper profits into realized losses. With capacity utilization at just 73.81%—a three-year low—plants have little urgency to destock aggressively.
Weaving mills see things differently. High cash flow signals further downside potential. Unless they have urgent orders, mills adopt a "buy only when necessary" approach. Delaying purchases by even a month could save hundreds of yuan per ton on identical output. This wait-and-see attitude further suppresses demand, creating a negative feedback loop.
Supply-Demand Mismatch
The core issue is weak demand amid ample supply. Unseasonably cool weather has delayed summer seasonal products like sun-protection apparel from ramping up. While export prospects are improving—the reopening of the Strait of Hormuz is restoring global commodity trade, and overseas economies are recovering—overseas demand cannot offset domestic weakness in the short term.
Despite three-year-low operating rates, absolute inventory levels remain high. Current production cuts are barely enough to prevent further accumulation, let alone reduce stocks. A true rebalancing requires either a meaningful demand recovery or deeper production cuts.
Export Orders as a Catalyst
Not all news is bearish. With international crude channels restored, overseas economic recovery is accelerating, which could boost textile export orders in Q3. If export volumes partially offset domestic weakness, polyester prices may find support. However, given the typical 2-3 month lead time for export orders, near-term impact will be limited.
In summary, the price gap between crude and polyester filament is unlikely to close rapidly. Plants resist realizing losses, while mills wait for lower prices. This standoff may persist until mid-to-late Q3, when either inventory pressure forces a move or demand surprises to the upside.