The 60-day free passage policy in the Strait of Hormuz has triggered a two-week decline in international oil prices, with Brent crude falling over 8%. This geopolitical dividend is rapidly transmitting through the cost chain to the upstream of the chemical fiber textile industry, as prices of PX, MEG, and methanol soften, marking the first significant cost relief for Chinese polyester mills this year.
Cost Side: Raw Material Prices Ease, but Transmission Speed Varies
Public data shows China's reliance on Middle Eastern imports for chemical fiber raw materials remains above 40%. Previously, congestion in the Strait of Hormuz delayed raw material arrivals and kept inventory low. With Iran removing surcharges for commercial vessels, backlogged tankers and chemical ships are entering ports, pushing up PX and MEG port inventories by 5% and 7% week-on-week, respectively. This weaker cost support has stabilized polyester chip and filament prices, with some specifications seeing slight factory price increases.
However, the cost dividend is not evenly distributed. Large polyester companies with high long-contract ratios and ample raw material reserves are less sensitive to short-term price fluctuations, while small- and medium-sized texturing and weaving mills, which rely more on spot purchases, benefit more directly. Industry surveys indicate that raw material restocking willingness among small mills in Jiangsu and Zhejiang has increased by about 15% in the past week, but orders remain small and just-in-time, with no signs of bulk hoarding.
Supply-Demand: Weak End Demand Remains the Core Contradiction
Despite the cost-side boost, the fundamental challenge facing the chemical fiber textile industry—insufficient demand—remains unchanged. In the first half of the year, textile and apparel export growth slowed, and domestic consumption recovery was lackluster, with home textile and apparel brands adopting price-cutting strategies. As a result, social inventory of chemical fiber products, though slightly digested due to lower costs, remains at a medium-high level for the past three years.
From the chain logic, cost dividends can only translate into industry profits if downstream orders materially recover. Currently, weaving mill operating rates are around 65%, down 5 percentage points year-on-year, indicating weak order momentum. Therefore, this round of price movement is more a 'cost-driven' structural adjustment than a 'demand-driven' reversal.
Uncertainty: Geopolitical Variables and Price Risks After the 60-Day Window
This passage policy is only valid for 60 days. After expiration, the rules and geopolitical situation remain highly uncertain. If the policy is not renewed, shipping costs through the Strait of Hormuz could spike again, likely causing oil and chemical raw material prices to rebound quickly. Mills that have moderately restocked may then face raw material depreciation risks, while those that waited may fall back into cost passivity.
Moreover, on the macro front, delayed Fed rate cuts and slow European economic recovery continue to pressure oil demand. Even with the short-term geopolitical premium fading, oil prices are unlikely to form a unilateral downtrend and will likely remain volatile. This means the cost repair window for the chemical fiber textile industry may be brief, forcing companies to balance between 'restocking to lower costs' and 'hedging against price drops'.