International crude oil prices fell below $70 per barrel on June 24, erasing all the premium accumulated since the escalation of the Middle East crisis. However, the market price of polyester filament yarn remains nearly 1,000 yuan per ton higher than pre-crisis levels. This price gap between crude oil and chemical fibers is tearing apart expectations along the supply chain and setting the stage for a new round of price negotiations.
Raw Materials Have Returned to Baseline, but Polyester Filament Has Not Followed
From the futures perspective, prices of PTA and MEG have essentially fallen back to their starting points before the recent rally, meaning that the theoretical cost of polyester filament yarn has dropped significantly. Yet spot market prices for POY, FDY, and DTY remain stubbornly high, creating a clear divergence from the cost side.
According to publicly available industry data, the current capacity utilization rate for domestic direct-spun polyester filament yarn stands at only 73.81%, a three-year low. Low operating rates should imply supply contraction, but inventory data tells a different story: POY inventory is around 30 days, FDY around 35.7 days, and DTY as high as 41.8 days. High inventory combined with low operating rates indicates that end-user demand is contracting even faster.
High Cash Flow on Paper vs. Historical Cost Burden
On paper, the cash flow for polyester filament yarn looks impressive: raw material costs have fallen while product prices remain high, creating a theoretical profit cushion. But this "paper wealth" masks a critical fact: most of the current inventory was produced during the high oil price period, with raw material costs far above current levels.
If polyester plants cut prices aggressively to destock, they would turn paper losses into realized losses immediately. Therefore, their strategy is to reduce prices slowly and sell slowly, controlling shipment pace under low operating rates to buy time and avoid one-time losses.
Weaving mills take the opposite stance. Facing high polyester prices and predictable downside, their strategy is "no purchase unless necessary." Unless they have confirmed orders to fulfill, they prefer to wait and watch. A one-month delay in purchasing could mean a cost difference of hundreds or even thousands of yuan per ton, with no difference in the final product.
Weak Demand Is the Root Cause, Abnormal Weather Adds to the Pain
The intense game between upstream and downstream stems fundamentally from weak end-user demand. The domestic market is sluggish, and this is the core pain point on the consumption side. For example, summer sun-protection garments usually peak in June, but this year's unusually cool weather has delayed the related fabric and apparel season.
This abnormal weather effect has directly transmitted upstream: weaving mill operating rates are low, and their willingness to purchase polyester filament is weak. Although polyester plants can control inventory growth through low operating rates, they cannot reverse the overall oversupply situation. The supply-demand gap is still widening.
Exports Could Be the Only Variable
The market is not without bright spots. With the full reopening of the Strait of Hormuz shipping channel, global crude oil and commodity trade is returning to normal. Faster economic recovery in multiple overseas economies is expected to boost international textile consumption demand.
For Chinese textile exporters, this could be a key variable to offset weak domestic demand. If export orders continue to improve, they will absorb some of the domestic polyester overcapacity, ease inventory pressure on polyester plants, and give weaving mills new purchasing incentives.
Short-Term Game Will Continue
In summary, the structural contradiction of "weak supply-demand, high price spread" in the polyester industry chain is unlikely to be resolved in the near term. Polyester plants are unwilling to cut prices and realize losses; weaving mills are unwilling to buy at high prices. Both sides are waiting for the other to blink first.
If oil prices remain around $70, downward pressure on polyester filament prices will only increase. But if export orders pick up and provide real demand support, the stalemate could break, leading to a re-pricing of the entire chain. The real turning point may come in the third quarter.