Crude oil prices dipped below $70 a barrel on June 24, returning to levels seen before the latest escalation in the Middle East. Yet polyester filament yarn prices remain nearly 1,000 yuan per ton above those pre-crisis levels. This discrepancy has locked the entire textile chain into a delicate standoff.
Why Is Polyester Filament Slow to React?
On the futures side, PTA and MEG have largely fallen back to their pre-rally levels, theoretically stripping away much of the cost support for polyester filament. Conventional logic would suggest that polyester prices should follow raw materials down. But reality is different: polyester plants have not cut prices aggressively. On June 24, only minor reductions of 50-150 yuan per ton were seen, far below market expectations.
The key reason lies in inventory cost. Current inventory days stand at about 30 for POY, 35.7 for FDY, and 41.8 for DTY. These stocks were produced when raw material prices were high. A sharp price cut now would turn paper losses into real losses. With capacity utilization at a three-year low of 73.81%, plants have little pressure to unload inventory quickly. They prefer to slowly reduce prices while controlling output.
Weavers' 'Buy Only When Necessary' Logic
For weaving mills, the current high cash flow of polyester filament (the spread between raw material and product prices) itself signals downside risk. They believe that since costs have fallen, polyester prices will inevitably follow. Buying today could mean a cost difference of several hundred yuan per ton a month later, while the fabric produced won't fetch a higher price.
Thus, unless they have orders to fulfill, weavers are postponing purchases and maintaining only minimal safety stock. This 'buy only when necessary' mentality further compresses downstream demand, creating a vicious cycle: the more they hold back, the higher the inventory; the higher the inventory, the more reluctant plants are to cut prices.
Supply Surplus and Weak Demand: The Core Issue
The standoff ultimately stems from weak end-user demand. Unseasonably cool weather in late June has delayed the start of the summer sunscreen fabric season. Weak domestic consumption is the core pain point for the textile market. Upstream production cuts and price support are only temporary buffers without real demand recovery.
However, there are positive signals. With the full reopening of the Strait of Hormuz shipping channel, global crude and commodity trade is normalizing, and several overseas economies are accelerating their recovery. This could boost demand for Chinese textile exports, partially offsetting domestic weakness and easing downward pressure on polyester filament.
Near-Term Outlook: Stalemate Likely to Continue
In the coming month, the polyester chain is likely to maintain a pattern of weak supply-demand fundamentals and high price spreads. Polyester plants will continue to use low utilization rates to defend price floors, while weavers will wait for clearer signs of price declines.
Two key variables could break the deadlock: first, whether crude oil can stabilize around $70 or rebound, which would set a cost floor for polyester; second, whether export orders materialize in Q3 as expected, which would determine real downstream demand recovery. Until then, the tug-of-war between upstream and downstream will dominate.