The sharp drop in oil prices has not brought a win-win situation to the polyester chain. Following the US-Iran peace agreement, international crude oil prices quickly fell back to pre-war levels. However, the cost collapse dividend has been intercepted in the midstream link, intensifying a three-way game over volume, price, and profit among upstream, midstream, and downstream players.
The Conflict of Three Demands
The current deadlock stems from conflicting demands from three sides. Upstream PTA and PX producers want filament plants to raise operating rates to absorb their own inventories. After large-scale maintenance in July, PTA and PX operating rates are already low, but with the gradual resumption of Strait of Hormuz shipping and completion of refinery maintenance after August, upstream urgently needs filament plants to increase rates to match the returning supply.
Downstream weaving enterprises are suffering from 'producing at a loss.' Before the oil price crash, filament prices were high, while downstream texturing and weaving orders could not raise prices, leading to widespread losses. Now, with cost collapse, filament prices remain stubbornly high. Downstream players believe filament processing margins are excessive and demand 'catch-up declines' to reasonable levels before replenishing inventories. For end-users, without reasonable raw material costs, accepting orders means losing money.
Midstream filament makers have a different logic. In past years, they would cut prices whenever raw material costs fell, resulting in compressed processing margins and becoming mere 'porters' for upstream. Now they choose to cut output to protect margins—operating rates have dropped to 70%, but per-ton profits have risen from 100 yuan to 500 yuan. Filament plants fear that cutting prices would trigger deeper wait-and-see behavior downstream, undermining their output reduction efforts.
The Chain Reaction of Output Cuts
The filament output cut strategy is creating chain reactions. With prices unchanged, downstream refuses to replenish, filament sales remain sluggish, inventories are hard to reduce, and rate increases are impossible. Without filament plants running, PTA demand cannot recover, and upstream's desire to accelerate destocking fails. The entire chain is trapped in a vicious cycle: 'filament refuses to cut prices—downstream stays away—sales don't pick up—inventories don't fall—rate increases are impossible—raw materials don't sell.'
This deadlock benefits no one. For upstream raw material players, short-term inventory pressure continues to accumulate, and long-term balance sheet repair becomes harder. For downstream weavers, idling means capacity waste and order loss. For filament plants themselves, while they protect profit floors, stagnant sales also bring inventory risks.
Key Variables for Breaking the Deadlock
The core of the game is whether filament makers will concede. If they launch a large-scale promotion to boost sales, inventory pressure will ease, providing motivation for rate increases, which could activate upstream PTA destocking. However, once promotions start, price decline expectations may strengthen, causing downstream to wait even more, creating a 'the more you cut, the more they wait' scenario.
Another variable is the actual recovery of end-user orders. If textile and apparel exports and domestic demand pick up in the second half of the year, downstream weavers will have to accept current filament prices, and the deadlock may break naturally. But if orders remain weak, downstream bargaining power will strengthen, making it difficult for filament plants to sustain output cuts.