International crude oil has fallen back to pre-Middle East crisis levels, yet polyester filament yarn prices remain nearly 1,000 yuan per ton higher. This discrepancy stems from a paradox of high cash margins versus high-cost inventory for polyester plants, and weavers' cautious buying stance. Weak domestic demand is the core issue, with export orders offering a potential rebalancing force.
Oil Returns, But Polyester Yarn Lags Behind
On June 24, U.S. WTI crude futures briefly dipped below $70 per barrel, wiping out all gains since the start of the Middle East tensions. Although a minor rebound occurred on June 25 due to renewed geopolitical risks, oil hovered around $70 again on June 26. Meanwhile, the market price of polyester filament yarn remains nearly 1,000 yuan per ton higher than before the rally.
This gap is no coincidence. Downstream, PTA and ethylene glycol futures have essentially returned to their pre-crisis levels, theoretically stripping away the cost support for polyester yarn. Yet actual factory-gate price adjustments have been minimal—only 50–150 yuan per ton on June 24—far from what weavers expect.
The Paradox of High Cash Flow and High Inventory
The polyester filament yarn sector is experiencing a classic 'paper wealth' phenomenon. Based on current raw material costs, the theoretical cash margin for polyester yarn is substantial, suggesting ample room for price cuts. However, plants are reluctant to lower prices quickly.
The reason lies in inventory costs. Current inventory levels stand at 30 days for POY, 35.7 days for FDY, and 41.8 days for DTY—all produced at higher raw-material prices. Aggressive price cuts would turn paper losses into realized losses. With capacity utilization at a three-year low of 73.81%, plants face limited pressure to sell, preferring to slowly destock through controlled output rather than proactively sacrifice margins.
For weavers, the logic is reversed. High cash margins imply significant downside risk for polyester yarn prices. Unless fulfilling urgent orders, purchasing raw materials for stock could lead to cost differences of hundreds or even thousands of yuan per ton within a month. Consequently, weavers have adopted a 'buy only when necessary' stance, purchasing on demand.
Weak Demand Is the Core Issue
The root of this standoff is tepid end-use demand. An unusually cool summer has delayed the peak season for summer fabrics like sun-protective clothing, directly curbing weavers' purchasing appetite. Weak domestic demand is a critical pain point for China's consumer market and the fundamental reason for the price transmission blockage in the polyester chain.
Yet not all is bleak. 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 international textile consumption, providing support for China's textile export market. Increased export orders would partially offset domestic weakness and ease downward pressure on polyester yarn.
Short-Term Gridlock Likely; Exports May Break the Stalemate
In the near term, the 'weak supply-demand, high price gap' pattern in the polyester chain is set to continue. The tug-of-war between polyester plants and weavers is essentially a contest between cost and inventory, expectations and reality. Without a meaningful pickup in domestic demand, polyester yarn prices lack solid support; but plants will not easily abandon their cash margin advantage, keeping price cuts slow and measured.
The pace of export order recovery will be the key variable to break this deadlock. If overseas orders sustain their uptick in the second half, weavers' buying sentiment will improve, potentially pulling polyester yarn prices back to reasonable levels. Conversely, if both domestic and external demand remain weak, the industry's adjustment period will lengthen.