The oil price collapse, triggered by the US-Iran peace deal and the reopening of the Strait of Hormuz, was expected to be a boon for the polyester industry. Instead, it has ignited a three-way stalemate. Upstream raw material producers hope filament plants will raise operating rates; downstream weavers demand filament price cuts; and midstream filament producers are using output reductions to protect margins, refusing to concede. This conflict revolves around volume, price, and profit, with no easy resolution in sight.
Cost Collapse Intensifies the Game
After the US-Iran peace deal, international oil prices fell back to pre-war levels, significantly weakening the cost support for upstream PX and PTA. However, this collapse has not brought universal benefits. China Customs data shows that in July, maintenance work on PX and PTA units intensified, reducing operating rates. But by August, as shipping in the Strait normalizes and refinery maintenance ends, raw material shortages are expected to ease. The upstream sector's core worry is whether polyester production can ramp up to absorb the returning supply.
Midstream Filament: The Logic of Profit Protection
Filament producers have a clear strategy: in past years, every raw material price drop triggered price promotions, compressing processing margins and turning them into mere 'conveyors' for upstream profits. Now, they are determined to protect hard-won margins. Industry data indicates current filament processing profits are historically high. Companies prefer operating at 70% capacity to maintain a CNY 500/tonne margin, rather than full capacity at CNY 100/tonne. This logic is based on precise market expectations: a price cut would trigger deeper downstream wait-and-see behavior ('If it drops today, it could drop tomorrow'), and undermine their output reduction efforts.
This stance has created a deadlock: filament producers refuse to cut prices, so downstream weavers stay on the sidelines, preventing sales. Without sales, filament inventories remain high, preventing capacity increases. Without higher filament capacity, upstream PTA sales stall, frustrating the upstream's goal of destocking. The entire chain is in a vicious cycle.
Downstream Weaving: The Cry for Reasonable Costs
Downstream weaving is the most painful link. Before the oil crash, weavers suffered from 'flour costing more than bread'—high filament prices with no ability to raise end-product prices, leading to widespread losses on current orders. Now, with raw material costs collapsing, weavers see hope but are angered by filament's price resilience and high processing margins. They view the situation as 'upstream feasts while downstream gets scalding soup.' Most are waiting for filament prices to 'catch down' to reasonable levels before restocking. Without rational raw material costs, taking new orders means guaranteed losses.
Upstream Raw Materials: Waiting for Filament to Move
The upstream sector's anxiety matches downstream's. July's heavy PX/PTA maintenance cuts have lowered operating rates, but post-August supply will return as shipping and refineries restart. The upstream's core wish is for filament plants to raise operating rates, boosting PTA demand and accelerating destocking. The most effective lever to achieve this is a filament sales promotion. Upstream producers are eagerly waiting for a big promotion that would clear filament inventory, allowing capacity increases and reviving the raw material destocking cycle.
Stalemate: Who Blinks First?
Currently, the three parties' demands are completely opposed: upstream and downstream gains seem to come at filament's expense, and vice versa. This zero-sum game is hard to break short-term. For downstream buyers, waiting may be optimal, but they must watch for filament producers' ability to sustain profit protection. For upstream producers, the only hope is that filament inventory pressure eventually forces a promotion. The outcome hinges on each side's financial strength and market patience.