Crude Oil Falls Back to $70, but Polyester Filament Hovers at a Premium: The Game of Thorns in the Chemical Fiber Chain

On June 24, WTI crude oil briefly broke below $70 per barrel, nearly erasing all gains since the onset of the Middle East geopolitical tensions. Although a modest rebound occurred on June 25 due to renewed instability, by June 26 oil had fallen back to around $70. Notably, polyester filament yarn prices remain nearly 1,000 yuan per ton higher than before the surge. This divergence is not a market anomaly but a rational response to the distinct constraints facing different segments of the supply chain.

Crude Retreats, Polyester Lags

From a cost perspective, PTA and MEG futures have largely returned to pre-crisis levels, theoretically removing the cost support for polyester filament. However, polyester plants face a far more complex reality. According to industry data, POY inventories stand at 30 days, FDY at 35.7 days, and DTY at 41.8 days. These stocks were produced when raw material prices were high; a sharp price cut now would turn paper losses into realized losses.

More importantly, capacity utilization is already at a three-year low—73.81% as of June 24, up just 0.29% from the prior week. Low operating rates mean polyester mills have no urgent need to destock aggressively, preferring to lower prices slowly and sell gradually.

Weavers Adopt 'Wait-and-See' Approach

For weaving mills, the high cash margin on polyester filament signals further downside risk. Buying raw materials a month apart could mean a cost difference of several hundred yuan per ton, while the final product sells at the same price. This expectation has pushed weavers into a 'non-essential, no-buy' mode, limiting procurement to immediate order needs.

This misalignment of expectations has created a classic standoff: upstream mills refuse to cut losses, downstream buyers refuse to stock up. Weak domestic demand deepens the problem. Unusually cool summer weather has delayed the seasonal peak for sun-protective fabrics, further dampening procurement appetite.

Exports Offer a Potential Outlet

Yet not all is bleak. With the Strait of Hormuz shipping channel fully reopened, global crude and commodity trade is normalizing, and several overseas economies are accelerating their recovery. This could boost international textile demand, providing some support for Chinese exports. Incremental export orders may partially offset domestic weakness and ease downward pressure on polyester filament.

In the near term, however, the 'weak supply-demand, high margin' pattern will persist. The tug-of-war between polyester plants and weavers will continue to dominate market dynamics. For buyers, the key question is not whether prices have bottomed, but how to balance order certainty with capital costs.

Practical Advice

For Buyers - If you have firm orders with clear delivery dates, procure in batches as needed to avoid production delays while waiting for lower prices. - Monitor polyester plant production cuts and inventory changes closely. Two consecutive weeks of inventory decline could signal a temporary price floor.

For Exporters - Use the current window—where polyester prices remain elevated but crude has fallen—to negotiate fixed-price forward contracts with overseas clients, hedging against future raw material volatility. - Keep a close watch on Middle East developments and Strait of Hormuz traffic. Once geopolitical risks ease, crude and downstream chemical prices may accelerate their correction, presenting a buying opportunity for raw materials.