International oil prices have fallen sharply due to the easing of geopolitical tensions in the Middle East, causing polyester raw material costs to collapse. However, this apparent 'dividend' from lower costs has not been smoothly transmitted along the polyester supply chain. Instead, a three-way game over volume, price, and profit is intensifying: upstream raw material producers want filament yarn makers to increase operating rates to destock their own inventories, midstream filament yarn firms are cutting production to protect margins, and downstream weaving mills are waiting for yarn prices to 'catch down'. These conflicting demands have created a rare stalemate.
Broken Cost Transmission: Misaligned Demands
Upstream, the PX and PTA sectors underwent significant maintenance shutdowns in July, with operating rates dropping to lows. With the reopening of the Strait of Hormuz for shipping and the end of refinery maintenance, the medium-term supply pressure for raw materials may ease. However, the current core contradiction lies in whether polyester operating rates can increase. Only if filament yarn operating rates rise can direct demand for PTA recover, enabling upstream destocking. The upstream sector's primary demand is for filament yarn companies to boost sales through promotions, thereby driving their own operating rates.
Midstream filament yarn companies operate on a completely different logic. In past years, every time raw material prices fell, filament yarn firms chose to cut prices to boost sales, compressing their processing margins and turning them into mere 'conveyors' for upstream suppliers. Now, these firms are determined to defend their profit floor: they prefer to run at 70% capacity, earning RMB 500 per ton, rather than running full capacity at RMB 100 per ton. This 'cut production to protect profit' strategy directly chokes the lifeline of the entire chain. If yarn firms refuse to lower prices significantly, downstream mills will not restock, sales volumes will not pick up, inventories will not fall, and operating rates cannot be increased.
The downstream weaving sector is in the most painful position. Before the oil price crash, end-users were suffering from the 'flour costing more than bread' phenomenon—yarn prices were high, but orders for texturing and weaving could not be raised, leading to losses on every order. Now that raw material costs have collapsed, downstream mills had hoped for relief, but yarn prices have remained stubbornly high, leaving processing margins elevated. Downstream firms view this as an unreasonable situation where 'upstream eats meat while downstream gets scalded soup', and they are choosing to wait for yarn prices to 'catch down' to a reasonable level before restocking.
Industry Impact: Short-Term Stalemate, Medium-Term Pressure
The current game pattern in the polyester chain is unlikely to break in the short term. Filament yarn companies' production cut strategy preserves profits but also suppresses downstream demand, leading to slow inventory digestion. If yarn prices do not fall, downstream weaving mills may further reduce operating rates or even shift orders to alternative materials, weakening long-term demand for yarn.
For upstream raw material producers, without higher filament yarn operating rates, the destocking process for PTA and PX will stall. While short-term maintenance can ease supply pressure, once maintenance ends and supply resumes, inventory pressure may rebuild, potentially causing a second round of price declines.
For downstream weaving mills, the current choice is a trade-off between 'waiting' and 'betting'. Waiting for yarn prices to fall risks missing the peak season order window; betting that raw material prices will not drop risks taking loss-making orders. Public industry data shows that loom operating rates in the Jiangsu-Zhejiang region have already declined slightly, with some mills opting for early holidays or production cuts.