International crude oil prices have returned to pre-Middle East crisis levels, with WTI crude briefly breaking below $70 per barrel on June 24. Yet polyester filament yarn prices remain nearly 1,000 yuan per ton higher than before the conflict. While PTA and ethylene glycol futures have largely returned to their starting points, polyester plants resist significant price cuts due to high-cost inventory, creating a stark divergence between cash flow and downstream buying appetite. Industry data shows POY factory inventory at 30 days, FDY at 35.7 days, and DTY at 41.8 days. Weaving mills adopt a 'buy only when necessary' strategy amid expectations of further price drops. The root cause is weak supply-demand dynamics and sluggish domestic demand, with export recovery potentially serving as a balancing factor.
This price gap is not a natural market transmission but a product of different cost structures and inventory pressures between upstream and downstream. Although polyester plants enjoy seemingly healthy cash flow on paper, the production cost of existing inventory remains high, meaning price cuts would convert paper gains into realized losses. With capacity utilization at only 73.81%, near a three-year low, plants have limited urgency to destock and prefer gradual price declines over sharp corrections.
Misaligned Pricing Logic
Weaving mills see things differently. For them, high cash flow implies significant room for further price drops. Delaying purchases by a month could save hundreds or even thousands of yuan per ton of raw material, with no difference in final product quality. This has led to widespread wait-and-see sentiment. Even after polyester plants cut prices by 50-150 yuan per ton on June 24, weavers deemed the reductions insufficient to trigger restocking.
This pricing expectation gap stems from a fundamental disagreement over what constitutes a 'fair price.' Polyester plants anchor on historical procurement costs and cash flow safety, while weavers anchor on current futures prices and future trends. The gap will require time or external shocks to close.
Weak Demand Underpins Divergence
Weak supply-demand dynamics and sluggish domestic demand are the root causes of this chain divergence. Summer is typically peak season for sun-protective fabrics, but unusually cool weather has delayed the seasonal uptick. With insufficient orders, weavers lack motivation to stock up. On the supply side, polyester plants control inventory growth through low operating rates, but weak final consumption prevents any price signal from transmitting effectively.
However, not all signals are negative. The full reopening of the Strait of Hormuz shipping channel is gradually restoring global crude and commodity trade flows. Accelerating recovery in several overseas economies is expected to boost international textile consumption demand. For Chinese textile exporters, this could mean incremental export orders that partially offset domestic weakness, providing a floor for polyester filament prices.
Game Unlikely to Break Soon
In the near term, the weak supply-demand, high-price-gap pattern will persist. The tug-of-war between polyester plants and weavers will dominate market dynamics. Plants must balance inventory costs against cash flow, while weavers must decide when to enter the market given low oil prices and weak domestic demand.