Oil Dips to $70, But Polyester Yarn Hangs High: Supply-Demand Standoff in the Polyester Chain

International crude oil has returned to $70, but polyester filament yarn prices remain suspended in mid-air, nearly 1,000 yuan per ton above pre-crisis levels. This divergence reveals a rare standoff between upstream and downstream players in the polyester chain.

Price Divergence: Oil Returns, Yarn Holds

On June 24, WTI crude briefly broke below $70, then rebounded slightly due to renewed Middle East tensions, but by June 26 it was back around $70. The geopolitical premium has been largely erased. However, polyester filament yarn prices have not followed suit. According to industry public data, compared to pre-crisis levels, polyester yarn remains about 1,000 yuan/ton higher. Meanwhile, PTA and ethylene glycol futures have essentially returned to their starting points, theoretically removing cost support.

This divergence has created a very healthy cash margin for polyester filament yarn. But behind that margin lies a clash of interests and inventory pressures between polyester mills and downstream weavers.

The Inventory and Cash Flow Paradox

For polyester mills, a healthy paper cash margin does not equal real profit. Current inventory days stand at 30 for POY, 35.7 for FDY, and 41.8 for DTY. These inventories were produced under high-cost raw materials. Selling them now at lower prices would turn unrealized losses into realized ones.

Therefore, polyester mills are choosing to maintain low operating rates and slowly reduce inventory. According to Longzhong data, on June 24, the capacity utilization rate for domestic direct-spun polyester filament yarn was 73.81%, up only 0.29% from the previous week, and still near a three-year low. Low operating rates mean less pressure to sell, giving mills the confidence not to cut prices aggressively.

But downstream weavers are not buying it. With polyester yarn prices still high and cash margins ample, weavers widely expect further price declines. Unless they have orders to fulfill, their purchasing strategy is "buy only when necessary." A one-month delay could mean a cost difference of hundreds or even thousands of yuan per ton, with no difference in the final product.

This standoff defines the current market: mills refuse to lower prices; weavers refuse to buy.

Supply-Demand Imbalance: Weak Domestic Demand Is Root Cause

The fundamental driver of this divergence is weak domestic demand. Unseasonably cool weather through late June has delayed the summer peak for products like sun-protection clothing, further suppressing polyester yarn demand.

But there are bright spots. With the full reopening of the Strait of Hormuz shipping channel, global crude and commodity trade is recovering. Faster economic recovery in several overseas economies is expected to boost international textile demand. Export orders will partially offset weak domestic demand, easing downward pressure on polyester yarn.

Practical Advice

For Buyers - Current polyester yarn prices remain elevated. For non-urgent orders, it is advisable to wait for a price correction driven by growing mill inventory pressure. - Monitor crude oil prices and Middle East developments. If oil stays below $70, polyester yarn prices will likely trend toward cost. - Negotiate short-term floating price agreements with suppliers to lock in a base price while retaining downside flexibility.

For Exporters - The recovery in export orders is worth capturing, but be aware that high polyester yarn prices may squeeze margins. Build in a risk premium for raw material price volatility when quoting. - Use futures to hedge PTA and ethylene glycol price risk and lock in forward procurement costs. - Track overseas economic recovery, especially textile restocking demand in Europe and Southeast Asia, and prepare to secure orders early.