Crude oil has fallen back to pre-Middle East crisis levels, but polyester filament yarn remains nearly 1,000 yuan per ton higher. This price gap reveals a tug-of-war between inventory costs and cash margins across the polyester supply chain.
Oil Returns, Polyester Premium Persists
On June 24, WTI crude briefly dipped below $70 per barrel, returning to levels seen before the escalation in the Middle East. Although it rebounded slightly on June 25 due to geopolitical fluctuations, crude hovered around $70 again on June 26. Meanwhile, polyester filament yarn prices have not followed suit—they remain about 1,000 yuan/ton higher than pre-crisis levels.
PTA and MEG futures have essentially returned to their pre-crisis baselines, implying that polyester filament's theoretical cash margin is quite healthy. However, high cash margins do not necessarily mean polyester plants are willing to cut prices.
The Paradox of High Margins and High Inventory
Polyester plants face a dilemma: on paper, cash margins look good, but the cost of their existing inventory is high. Data shows current POY inventory at around 30 days, FDY at 35.7 days, and DTY at 41.8 days. These stocks were produced at higher raw material costs. If plants cut prices sharply now, paper losses would become real losses.
As a result, they adopt a 'slow price reduction, slow sales' strategy. With capacity utilization at only 73.81% (Longzhong data, June 24), they have limited urgency to offload inventory and prefer to wait for better timing.
For weaving mills, the situation is the opposite. High cash margins imply further downside risk for polyester prices. Unless they have firm orders to fulfill, purchasing for inventory could result in cost differences of hundreds or even thousands of yuan per ton within a month. Consequently, they adopt a 'buy only when necessary' stance, compressing procurement to the bare minimum.
Supply Glut and Weak Demand Are the Core Issues
The fundamental driver of the price divergence is a combination of oversupply and weak domestic demand. Unusually cool summer weather has delayed the seasonal demand for sun-protective clothing. Weaving mills face weak orders, further suppressing raw material purchases.
However, there are bright spots. The Strait of Hormuz shipping channel has fully reopened, restoring global crude and commodity trade flows. Meanwhile, several overseas economies are accelerating their recovery, which could boost international textile consumption. Export orders may partially offset domestic weakness and alleviate downward pressure on polyester filament.
Outlook: Continued Standoff, Watch Export Signals
In the short term, the 'weak supply-demand, high margin gap' pattern in the polyester chain will persist. The tug-of-war between plants protecting margins and mills waiting for lower prices will dominate market direction.
Key variable: whether overseas orders materialize in Q3. If exports pick up, polyester plants' inventory pressure will ease, limiting further price declines. Conversely, as high-cost inventory is gradually worked through, plants may be forced to offer deeper discounts.