Crude oil has fallen back to around $70 per barrel, yet polyester filament yarn still carries a premium of nearly 1,000 yuan per ton over pre-crisis levels. This June, the polyester chain is witnessing a rare 'scissors gap' between upstream and downstream players.
The Cash Flow Paradox Behind the Price Gap
On June 24, WTI crude oil briefly dipped below $70/barrel, returning to levels seen before the escalation of the Middle East crisis. Although a slight rebound occurred on the 25th due to renewed tensions, oil prices hovered near $70 again on the 26th. Meanwhile, polyester filament yarn prices remain nearly 1,000 yuan/ton higher than before the conflict.
This premium is essentially a reflection of the high cash flow enjoyed by polyester plants. On the feedstock side, PTA and ethylene glycol futures have largely returned to their pre-crisis levels, which means the theoretical profit margin for polyester filament is quite substantial. However, for weaving enterprises, high cash flow signals a high probability of future price declines. If the purpose is merely to build inventory rather than fulfill orders, delaying procurement by a month could result in a cost difference of several hundred or even a thousand yuan per ton, while the final product remains identical. Consequently, the weaving sector has generally adopted a 'no buy unless necessary' stance.
Polyester plants, however, face a different dilemma. While the paper cash flow looks attractive, the production cost of existing inventory is far from low. Data shows that POY inventory stands at about 30 days, FDY at 35.7 days, and DTY at a high of 41.8 days. A significant price cut now would turn paper profits into realized losses. With low operating rates, plants have no urgent need to liquidate inventory and prefer a strategy of slow price reductions and gradual sales.
Production Cut 'Rumors' vs. Actual Operating Rates
Market rumors about 'major polyester plants further increasing production cuts' are nothing new in the industry. Such news is sometimes true, sometimes false, but it reflects the plants' attempt to support prices through supply contraction.
However, actual data tells a different story. On June 24, the operating rate of domestic direct-spun polyester filament units stood at 73.81%, a slight increase of 0.29% from the previous week. While this level is at a three-year low and helps control inventory buildup, it does not indicate any unexpected additional cuts. After the crude oil crash, PTA and ethylene glycol futures plunged, removing any justification for polyester filament price increases. On the 24th, some plants slightly reduced prices by 50-150 yuan/ton, but this adjustment fell far short of weavers' expectations.
Weak Demand Is the Root Cause; Exports May Offer a Breakthrough
The core driver of the chain's divergence is the imbalance between strong supply and weak demand, particularly the lackluster domestic market. This is not just a polyester issue but a common pain point across China's consumer sector.
Summer is typically the peak season for sun-protective clothing, but unusually cool weather this year, with temperatures remaining low near July, has delayed the related market uptick. Weak domestic demand directly suppresses weavers' purchasing willingness, further intensifying the tug-of-war between upstream and downstream players.
On the positive side, external conditions are improving. With the full reopening of shipping lanes in the Strait of Hormuz, global crude oil and commodity trade is gradually returning to normal. The accelerating economic recovery in multiple overseas economies is expected to boost international demand for textiles. If export orders can partially offset domestic weakness, it would help relieve the downward pressure on the polyester filament market.