Crude oil prices have fallen back to levels seen before the escalation of the Middle East conflict, yet the price transmission along the polyester chain remains uneven. Polyester filament yarn currently remains nearly 1,000 yuan per ton above its pre-surge level. This price gap reflects a strategic standoff between polyester plants and weaving mills over inventory costs and procurement timing.
Crude Returns to Origin, Polyester Remains Elevated
On June 24, U.S. WTI crude oil futures briefly dipped below $70 per barrel, essentially returning to the level before the latest Middle East geopolitical tensions. Although prices rebounded briefly on June 25 due to renewed regional instability, they hovered around $70 again on June 26. Meanwhile, polyester filament yarn prices have softened only modestly, still nearly 1,000 yuan per ton above pre-surge levels.
From the cost side, PTA and MEG futures have largely returned to their starting points, theoretically weakening the cost support for polyester filament. Industry data shows that polyester filament's cash flow is currently quite substantial, implying significant room for price cuts. Yet, such cuts have not materialized as expected.
The Paradox of High Cash Flow and High Inventory
Polyester plants' seemingly ample cash flow stems from current low raw material costs. However, the stockpiled polyester yarn in their warehouses was produced at much higher costs. As of June 24, POY inventory stood at 30 days, FDY at 35.7 days, and DTY at a hefty 41.8 days. Aggressive price cuts now would directly convert paper losses into realized losses.
Consequently, polyester plants have opted for a cautious approach: maintaining low operating rates and releasing inventory slowly. As of June 24, the operating rate for domestic direct-spun polyester filament was only 73.81%, a three-year low. Low operating rates mean less pressure to sell, so plants prefer gradual price declines over one-time concessions.
For weaving mills, the situation is the opposite. The high cash flow implies a high probability of future price drops. Unless fulfilling urgent orders, mills are adopting a "buy only when necessary" stance to avoid locking in high costs. This has further suppressed demand.
## Supply-Demand Imbalance is the Core Issue
The root cause of the upstream-downstream tug-of-war is the macro-level supply-demand imbalance. Unusually cool summer weather has delayed the seasonal demand for sun-protective fabrics, highlighting weak domestic demand.
However, external demand shows some positive signs. With the full reopening of the Strait of Hormuz shipping channel, global crude and commodity trade is normalizing. Multiple overseas economies are accelerating their recovery, which is expected to boost international textile consumption. Increased export orders could partially offset domestic weakness and provide some support for the polyester filament market.
In the near term, the pattern of weak supply-demand balance and high price spreads is likely to persist. The tug-of-war will depend on polyester plants' inventory digestion speed and the genuine recovery of end-user demand.