International oil prices have tumbled following the US-Iran peace deal, with the Strait of Hormuz gradually reopening. This geopolitical shift should have been a cost boon for the polyester chain. Yet, industry data shows polyester filament prices have not fallen in tandem, displaying notable resilience. While PX and PTA producers have cut output through heavy maintenance in July, filament makers have also reduced loads, effectively trapping the cost relief within their own segment and triggering a fierce tug-of-war among upstream, midstream, and downstream players.
The Roots of the Trilemma
The polyester chain is currently trapped in a classic prisoner's dilemma. Downstream weavers have long suffered from a situation where "flour costs more than bread"—filament prices remain high, while end-product orders cannot be raised, making immediate production unprofitable. After the oil price crash, weavers expected filament prices to "catch down" to a reasonable level before restocking. But filament producers, scarred by past experiences where every raw-material price drop squeezed their processing margins, have chosen to cut output to protect profits. Industry data shows filament makers have reduced loads to around 70%, boosting per-ton processing margins from CNY 100 to CNY 500.
Upstream raw-material suppliers are in an even more awkward position. PX and PTA producers have already lowered loads through heavy maintenance in July, but their greater anxiety stems from the expected return of supply from August onward, as shipping through the Strait resumes and refinery maintenance ends. Their core demand is for filament makers to raise loads to match future supply increases. Yet, filament producers refuse to cut prices and increase sales, resulting in persistently low sales-to-production ratios. This blocks PTA demand recovery and stalls upstream destocking.
The Filament Makers' Strategic Hold
Filament producers' tough stance is not irrational. In past years, every price cut triggered by raw-material drops led to compressed processing fees, turning them into mere "porters" for upstream suppliers. Now, they are building a "profit fortress" through output cuts. Their logic: running at full capacity to earn CNY 100 per ton is worse than running at 70% capacity to earn CNY 500 per ton. This strategy directly pinches both ends of the chain—without price cuts, weavers won't restock; without sales, inventories won't fall; without inventory reduction, loads can't be raised; without higher loads, PTA can't sell.
This standoff hits downstream weavers hardest. Until filament prices adjust, accepting orders means producing at a loss. In major weaving hubs like Zhejiang and Jiangsu, mill utilization rates have already declined, with some small and medium enterprises opting for temporary shutdowns. Industry data indicates that the margin squeeze between order prices and raw-material costs has approached levels last seen in mid-2023.
Key Variables for a Breakthrough
No party is willing to concede first. However, industry analysis suggests three possible catalysts: first, filament makers being forced to discount as inventory pressure becomes unbearable; second, weavers accepting current prices due to order delivery deadlines; or third, upstream suppliers squeezing their own margins to pressure filament makers into concessions.
Historically, filament producers' strategy of cutting output to protect margins is difficult to sustain long-term. Once inventories exceed safe thresholds, cash-flow pressures will likely force promotional sales. For downstream weavers, the most rational strategy now is to maintain low inventories and purchase on a need-to-buy basis, avoiding stockpiling at high prices.