International crude oil prices have fallen back to pre-crisis levels, but polyester filament yarn still carries a premium of nearly 1,000 yuan per ton compared to before the geopolitical tensions. This price gap is creating a delicate tug-of-war between polyester mills and weaving enterprises.
Oil Returns to Starting Point, Yarn Premium Remains
On June 24, WTI crude briefly dipped below $70 per barrel, returning to levels seen before the Middle East tensions escalated. Although a slight rebound occurred on June 25 due to renewed geopolitical uncertainties, oil hovered around $70 again on June 26. The entire rally in crude has essentially been erased. Polyester filament yarn, however, has not followed suit. Compared to pre-crisis levels, the yarn still trades nearly 1,000 yuan per ton higher. Upstream PTA and MEG futures have largely surrendered their gains, leaving polyester yarn with an unusually wide cash margin.
Inventory Dilemma and the Cost of Cutting Prices
Industry data shows that the capacity utilization rate of direct-spun polyester filament yarn plants currently stands at about 73.81%, up slightly by 0.29% from the previous week. Over a longer horizon, this rate remains near a three-year low. Lower operating rates help control inventory, but actual stock levels remain high: POY mills hold around 30 days of inventory, FDY about 35.7 days, and DTY 41.8 days. High inventories come with high production costs from earlier raw material purchases. If mills cut prices aggressively now, paper losses would become real losses. With limited shipping pressure under low operating rates, mills prefer to lower prices slowly and sell gradually.
Weavers Adopt 'Buy Only When Necessary' Mentality
For weaving enterprises, the high cash margin on polyester yarn signals significant room for future price declines. The industry widely expects that without urgent orders for delivery, postponing purchases by a month could save hundreds or even thousands of yuan per ton of raw material. The same fabric output would cost vastly different amounts. Consequently, weavers have entered a 'buy only when necessary' mode, with procurement slowing markedly and restocking limited to immediate needs. Stockpiling intentions are extremely low.
Root Cause: Weak Demand Amid Ample Supply; Weather and Exports as Wildcards
The fundamental divergence along the polyester chain stems from a classic case of ample supply but weak demand, particularly in the domestic market. Weak domestic consumption is the most pressing pain point. For example, summer is normally peak season for sun-protective fabrics, but unseasonably cool weather this year—still not hot even approaching July—has delayed the related market's takeoff. Yet not all is bleak. With the full reopening of the Strait of Hormuz shipping channel, global crude and commodity trade order is gradually recovering. Multiple overseas economies are accelerating their recovery, which is expected to boost international textile demand. Export orders may partially offset domestic weakness and provide some support for polyester yarn prices.
Short-Term Pattern Unlikely to Break; Upstream-Downstream Game Continues
In summary, the near-term outlook for the polyester chain remains one of weak supply-demand balance and wide price spreads. Polyester mills are reluctant to cut prices proactively, while weavers are unwilling to buy at elevated levels. This tug-of-war will continue to dominate market dynamics.