International oil prices plunged after the US-Iran peace agreement reopened the Strait of Hormuz, but the polyester industry chain fell into an unusual stalemate. The three parties—upstream raw materials, midstream filament producers, and downstream weaving mills—have conflicting demands, and no one is willing to make the first move. The core of the game lies in the 'profit fortress' built by filament producers through production cuts, which is blocking the vital links between upstream and downstream, preventing the smooth transmission of volume, price, and profit across the chain.
The Upstream Dilemma: Desperate for Filament Load Increases, but Waiting in Vain for Promotional Volume
PX and PTA upstream underwent large-scale maintenance in July, significantly reducing their operating rates. However, after August, as shipping through the strait resumes and refinery maintenance ends, the raw material supply shortage will gradually ease. The most urgent wish of the raw material side is for filament producers to increase their operating rates, because only when filament loads rise can PTA demand recover, accelerating destocking and repairing the forward balance sheet. Yet, with filament producers currently cutting production significantly, the 'big promotion' that raw material suppliers hope for has not materialized. Behind this is a game over inventory and profit: raw material suppliers want filaments to cut prices to move volume and digest PTA, but filament producers are unwilling to sacrifice their processing margins.
The Downstream Anger: Producing at a Loss, Waiting for Filament 'Catch-Down'
Downstream weaving mills are the most painful link in the chain. Before the oil price crash, they suffered from the 'flour more expensive than bread' dilemma—upstream filament prices were high, but terminal orders for texturing and weaving couldn't be raised, making production-on-purchase generally loss-making. Now that oil prices have collapsed, polyester raw material costs have fallen sharply, and downstream finally sees hope for relief. But filament prices remain resilient, with processing margins staying high. From the downstream perspective, this situation where 'upstream eats meat while downstream gets only hot soup' is unreasonable. They refuse to replenish inventory, waiting for filament prices to 'catch down' to a reasonable level. Without reasonable raw material costs, accepting terminal orders is just losing money. This wait-and-see sentiment has kept sales volumes low, further increasing filament inventory pressure.
The Filament Logic: Cutting Production to Protect Profits, Refusing to Be a 'Transporter'
The logic of filament companies is clear: in past years, whenever raw material prices fell, they would cut prices to promote sales, only to see their processing fees squeezed to nothing, turning them into mere 'transporters' for upstream. Now, they are determined to protect the profit floor they have painstakingly built. Previously, running at full capacity yielded a profit of 100 per ton; now, running at 70% capacity yields 500 per ton—a much better economic equation. Once prices are lowered, it would not only trigger deeper wait-and-see behavior downstream ('If it can drop today, can it drop again tomorrow?'), but also nullify all previous production cut efforts. This tough stance has created the current standoff: filaments refuse to cut prices significantly, downstream refuses to buy, sales volumes remain low; with low sales, filament inventories cannot decrease, making load increases impossible; and without filament load increases, upstream PTA can't be sold, preventing upstream from accelerating its destocking.
The Stalemate: Who Will Give Way First?
Currently, the three parties in the polyester chain have fundamentally conflicting demands:
- The raw material side wants 'volume', hoping filaments will increase loads to digest PTA.
- The filament side wants 'profit', maintaining high processing margins through production cuts.
- The downstream side wants 'price', waiting for filament prices to fall before replenishing.
The desires of the raw material and downstream sides both seem to come at the expense of the filament side; conversely, the filament side's goals also sacrifice the interests of both upstream and downstream. This zero-sum game has trapped the chain in a dead loop. In the short term, filament companies hold the initiative by cutting production and blocking upstream and downstream. But in the long run, if downstream weaving continues to wait and terminal orders remain unreleased, filament inventory pressure will eventually build up, forcing prices down. Meanwhile, the raw material side faces the dual pressure of high PTA inventories and the return of supply in the future.
Breaking the Deadlock: External Variables or Voluntary Concessions
Breaking the deadlock may require one of the following conditions:
- Terminal demand recovery: If weaving orders see substantial improvement, downstream replenishment will strengthen, filament sales volumes will rise, and the chain's cycle can resume.
- Filament-side promotions: If filament companies choose to temporarily cut prices to boost volume, they can both digest inventories and lure downstream back into the market, while also helping upstream destock. However, this would have a short-term impact on filament profits.
- Raw material concessions: Further declines in PX/PTA prices would compress filament processing margins, forcing filament companies to lower prices and increase volume. This depends on crude oil price trends and refinery operating rates.
According to industry public data, this game in the polyester chain has lasted for weeks, with each side waiting for the other to make the first move. For buyers and export companies, this stalemate poses both risks and opportunities.