The US-Iran peace deal has sent international oil prices tumbling and gradually restored shipping through the Strait of Hormuz, but the polyester chain has not reaped the cost dividend. Instead, a three-way standoff is intensifying among upstream raw material suppliers, midstream filament yarn producers, and downstream weaving mills, centered on volume, margin, and price. Upstream PTA producers want filament plants to raise operating rates to absorb inventory; downstream weavers are waiting for filament prices to fall before placing orders; and filament makers are defending high processing margins through production cuts.
The Essence of the Three-Way Conflict
Upstream PX and PTA sectors carried out large-scale maintenance in July, further reducing operating rates. However, after August, with the resumption of Strait shipping and the end of refinery turnarounds, raw material supply will gradually loosen. The core demand from upstream is for filament plants to quickly raise operating rates to match the return of supply in the future and accelerate inventory destocking. Yet the lever to move filament producers—promotional sales with price cuts—shows no sign of loosening.
Downstream weaving mills are in the most difficult position. Before the oil price crash, they had long suffered from the "flour more expensive than bread" syndrome: high filament prices but no room to raise fabric prices, making every order a loss. Now that raw material costs have collapsed, filament prices are surprisingly resilient, maintaining high processing margins. Weavers insist on waiting for filament prices to "catch down" to a reasonable level before restocking, because placing orders at current prices still means losses.
Filament producers think differently. In past years, every time raw material prices fell, they cut prices to boost sales, only to see processing margins squeezed to near zero, turning them into mere "porters" for upstream. Now, by cutting operating rates to 70%, they have raised per-ton processing profit from 100 yuan to 500 yuan—a clearly better deal. They fear that once they cut prices, downstream will expect further cuts, destroying the gains from production cuts.
How Output Cuts Control the Chain's Lifeline
The tough stance of filament makers has created a vicious cycle: they refuse to cut prices, so downstream holds off purchases, keeping sales low; low sales prevent inventory reduction, making it impossible to raise operating rates; and without higher filament output, upstream PTA sales remain weak, thwarting destocking goals.
The key node in this cycle is the filament segment. As the midstream link, filament producers control both upstream demand and downstream supply. Cutting output not only boosts their own margins but also gives them pricing power over both ends of the chain: upstream PTA shipments depend on filament operating rates, and downstream weavers' costs depend on filament prices.
Industry data shows filament processing margins are at multi-year highs, while downstream weaving margins are near breakeven. This imbalance reflects capacity concentration: the filament sector has a higher concentration ratio, allowing a few players to influence supply through coordinated cuts; downstream weavers are numerous and fragmented, with weak bargaining power.
When Will the Stalemate Break?
No party is willing to make the first move. Filament makers have short-term incentive to maintain cuts, as high margins offset lost volume; downstream weavers risk losing customers if they wait too long; and upstream faces pressure from oversupply after August, with time not on their side.
Possible triggers to break the deadlock include: first, a seasonal demand pickup, such as autumn/winter fabric orders, forcing weavers to restock; second, further upstream price cuts that narrow filament processing margins; third, policy or environmental factors adjusting operating rates. The first scenario is most likely but requires time.