The international oil price plummeted due to the US-Iran peace agreement and the reopening of the Strait of Hormuz, but the polyester industry chain did not see the expected positive resonance. Instead, a zero-sum game over volume, price, and profit is intensifying among upstream raw materials, midstream polyester filament yarn (PFY), and downstream weaving.
The Core of Misaligned Interests: Three Parties' Demands
The pain is distributed unevenly across the chain. The upstream PX and PTA sectors are undergoing heavy maintenance in July, further reducing operating rates, but after August, with shipping resumption and refinery restarts, raw material shortages will gradually ease. The upstream's core demand is for PFY firms to raise operating rates quickly; only then can direct PTA demand recover and upstream inventory destocking accelerate.
Midstream PFY companies have a completely different calculation. In past years, every time raw material prices fell, they cut prices to promote sales, compressing processing margins to near zero and turning PFY into a mere 'porter' for upstream. Now they are determined to defend their profit floor—operating at 70% capacity, earning 500 yuan per ton, which is more profitable than the previous full capacity at 100 yuan per ton. Once prices are lowered, downstream will anticipate even lower prices and continue to wait, and the fruits of production cuts will be lost.
The downstream weaving sector is the most painful. Before the oil price collapse, they had long endured the pressure of 'flour being more expensive than bread'—high PFY prices but inability to raise order prices, with immediate production often resulting in losses. Now, with raw material costs collapsing, PFY prices are abnormally resistant to decline. Downstream believes the ultra-high processing margins in the PFY segment are unreasonable and refuse to restock before prices 'catch down'.
The Game Deadlock: Production Cuts as the Core Lever
PFY firms have used production cuts as a 'sharp blade' to simultaneously choke both upstream and downstream. The current situation is a typical prisoner's dilemma:
- PFY refuses to cut prices → downstream refuses to enter market → low sales → PFY inventory fails to drop → no basis to raise operating rates
- PFY can't raise operating rates → upstream PTA sales slump → upstream destocking goals unmet
No party is willing to make the first concession. PFY firms fear that price cuts would trigger deeper downstream wait-and-see behavior, keeping sales low; downstream believes current order prices still yield no profit, making entry equivalent to 'losing money for nothing'; upstream can only wait for PFY to launch promotions to unlock the chain.
Industry Impact and Key to Breaking the Deadlock
According to public industry data, current PFY processing margins are at a two-year high, while downstream weaving operating rates have shown signs of decline. If this profit distribution imbalance persists, terminal orders will further shrink, eventually forcing the entire chain to reduce loads.
The key to breaking the deadlock may come from two fronts: first, a recovery in external demand, forcing downstream to accept current prices; second, PFY inventory pressure reaching a tipping point, compelling firms to offer discounts. Given that raw material supply will gradually ease after August, the window for PFY firms is narrowing.