The sharp drop in oil prices following the US-Iran peace agreement in early July 2026 has not brought relief to the polyester industry chain. Instead, industry data reveals a paradoxical situation: while upstream feedstock costs have collapsed, midstream polyester filament prices remain stubbornly high, trapping downstream weaving mills in a 'buy now, lose now' cycle. A three-way game over volume, price, and profit is tearing the chain apart, with filament producers' production cuts at the center of the conflict.
Downstream Dilemma: Stubborn Prices, Loss-Making Orders
Weaving mills are the most pressured link. Before the oil price crash, high filament costs and stagnant downstream order prices created a 'flour more expensive than bread' scenario, making immediate production unprofitable. Now, feedstock costs have fallen, but filament producers have not followed suit. Mills believe the current processing profit margin for filament is unreasonably high, describing the situation as 'the upstream eats meat while the downstream gets scalding soup.' They are waiting for filament prices to 'correct' to a reasonable level before restocking. For buyers, without rational raw material costs, accepting orders means guaranteed losses, and this wait-and-see attitude is choking the entire chain's liquidity.
Upstream Anxiety: High PTA Inventories, Waiting for Filament to Move
Looking at the upstream, PTA and PX plants underwent heavy maintenance in July, reducing operating rates. However, starting in August, the reopening of the Strait of Hormuz and the end of refinery maintenance will ease raw material shortages. The key issue is whether polyester production can increase to match the future supply recovery. Upstream players need filament producers to raise operating rates to boost PTA demand, enabling destocking and balance sheet repair. But filament producers' output cuts are blocking this, leaving upstream players hoping in vain for a major filament promotion to clear inventories.
Filament Strategy: Profit Protection through Capacity Cuts
Filament producers have a clear, hard-line logic. In past years, every raw material price drop triggered discount promotions, compressing processing margins to near zero and turning them into mere 'handlers' for upstream. Now, they are determined to defend their profit base: previously, running at full capacity yielded a profit of 100 yuan per ton; now, at 70% capacity, they earn 500 yuan per ton. The trade-off is that any price cut would trigger deeper downstream wait-and-see, undermining the production cut efforts. This creates a stalemate: filament producers won't cut prices, downstream won't buy, sales remain low, inventories stay high, and upstream PTA sales slump.
Transmission Effects: From Industry Chain to Export Orders
The impact extends beyond domestic industrial clusters. Filament output cuts tighten supply, but downstream mills cannot accept low-priced export orders due to high raw material costs, causing fluctuating operating rates in texturing and weaving plants. For exporters, pricing models face a dilemma: basing quotes on current filament prices risks losing orders to competitors, while quoting based on expected price drops risks losses if prices don't fall. A deeper concern is that rising PTA inventories may force upstream to cut output further, creating a 'cuts-inventory-cuts' spiral that eventually raises long-term raw material costs.