The oil price crash has not brought a celebration to the polyester chain; instead, it has ignited a three-way battle over volume, price, and profit. Upstream raw materials, midstream filament yarn, and downstream weaving have conflicting demands, with filament yarn producers using output cuts to choke both ends. This stalemate is unlikely to break soon, and who yields first will determine Q3 profit distribution.
Root of the Three-Way Conflict
Upstream, PX and PTA plants underwent heavy maintenance in July, cutting loads further. But after August, with the Strait of Hormuz shipping resuming and refinery maintenance ending, raw material shortages will ease. The upstream wants filament yarn to raise loads quickly; only then can PTA demand recover, enabling destocking and balance sheet repair.
Downstream weaving is caught in a 'loss on every order' trap. Before the oil crash, filament yarn prices were high, and downstream couldn't raise prices. Now with raw material costs plunging, downstream sees filament yarn prices as unrealistically sticky and its high processing margins as unfair. They wait for a 'catch-up drop' before restocking.
Midstream filament yarn producers have a different logic. In past years, every time raw materials fell, they cut prices, only to see processing margins squeezed to zero. Now they are determined to protect their hard-won profit floor: running at 70% capacity, earning 500 yuan per ton, is better than full capacity at 100 yuan. Cutting prices now would trigger deeper downstream waiting and waste previous output cuts.
The Stalemate's Chain Reaction
The standoff forms a closed loop: filament yarn won't cut prices, downstream won't buy, sales stall; sales stall, filament yarn inventory won't drop, so no load increase; no load increase, PTA can't sell, upstream destocking fails. Each side wants the other to move first, but no one blinks.
This hurts the chain structurally. Downstream mills reduce output or shut down due to high costs, losing orders; filament yarn firms keep margins but accumulate inventory risk; upstream faces oversupply after maintenance ends.
Industry data show a clear divergence: PTA plant loads fell to ~75%, filament yarn to ~70%, and downstream weaving to under 60%. This descending utilization rate signals severe demand-side pessimism.
Key Variables to Break the Deadlock
Breaking the stalemate may require external catalysts: further oil price drops squeezing filament yarn margins; a real recovery in textile orders forcing downstream to accept current prices; or policy moves like export tax adjustments or stricter environmental curbs changing one side's leverage.
For buyers and exporters, now is not the time to blindly stock up. Filament yarn prices are still high, and downstream demand is weak, leaving room for further decline. Maintain low inventories and wait for the promotional window when filament yarn inventory pressure peaks.