International crude oil prices have fallen back to levels seen before the escalation of the Middle East crisis, but polyester filament yarn prices remain nearly 1,000 yuan per ton higher than before the conflict. This premium has become the most contentious issue in the current polyester supply chain: upstream raw materials have returned to their starting point, yet downstream weaving mills are still waiting for polyester yarn prices to follow suit.
Why Polyester Yarn Lags Behind Oil
On June 24, U.S. WTI crude futures briefly dipped below $70 per barrel, returning to levels seen before the latest Middle East tensions. Although prices rebounded slightly on June 25 due to renewed geopolitical uncertainty, they fell back to around $70 on June 26. Meanwhile, PTA and MEG futures have also fallen back to pre-crisis levels, but polyester filament yarn prices remain nearly 1,000 yuan per ton higher.
This discrepancy stems from a dilemma faced by polyester plants: on paper, current cash margins for polyester yarn are substantial, suggesting room for price cuts. However, the yarn currently in inventory was produced during a period of high raw material costs. As of June 24, POY inventories stood at 30 days, FDY at 35.7 days, and DTY at 41.8 days. A sharp price cut would convert paper gains into real losses. With capacity utilization at only 73.81% (data from Longzhong), polyester plants have little incentive to destock aggressively, preferring instead to lower prices gradually.
Supply-Demand Mismatch: Mills Adopt 'Buy Only When Necessary'
For weaving mills, the high cash margins on polyester yarn signal a high probability of future price declines. Unless they have firm orders to fulfill, purchasing yarn now only to build inventory risks a cost difference of several hundred yuan per ton within a month, for the same final product. This expectation has led to a 'buy only when necessary' procurement strategy, further suppressing actual demand for polyester yarn.
Critically, end-user demand has failed to provide support. Unseasonably cool weather this summer has delayed the launch of seasonal orders for sun-protective clothing, making weak domestic demand the core pain point. The imbalance between supply and demand is exacerbating the standoff between upstream and downstream players.
Can Exports Be the Lifeline?
However, not all is bleak. With the full reopening of the Strait of Hormuz shipping channel, global crude oil and commodity trade is gradually normalizing. Several overseas economies are accelerating their recovery, which is expected to boost international demand for textile products. For Chinese textile exporters, incremental export orders could partially offset weak domestic demand, alleviating some downward pressure on the polyester yarn market.
In the short term, however, the pattern of weak supply-demand dynamics and high price premiums in the polyester chain is likely to persist. The return of the 1,000-yuan premium will ultimately depend on the digestion of high-cost inventories or a substantive recovery in end-user demand.