The US-Iran peace agreement has restored navigation through the Strait of Hormuz, sending international oil prices back to pre-conflict levels. However, for the polyester industry, this cost collapse has not brought universal joy but instead intensified a deep-seated tripartite game over volume, price, and profit across the supply chain.
Broken Cost Transmission
Public data shows that after the oil price drop, upstream polyester raw material prices for PTA and PX followed the decline, but midstream polyester filament yarn prices showed unusual resilience. Industry statistics indicate that filament processing margins are currently at multi-year highs, while downstream weaving enterprises face the dilemma of 'producing at a loss'—raw material costs have fallen, but end-order prices have not adjusted synchronously.
This broken cost transmission has directly cooled downstream purchasing intentions to freezing point. Weaving enterprises are generally waiting on the sidelines, holding off on restocking until filament prices 'catch down' to a reasonable level. Industry insiders reveal that downstream companies are extremely cautious about taking new orders, as without reasonable raw material cost support, any new order could become a loss-making contract.
Tripartite Demands and Game Logic
The upstream raw material sector (PX/PTA producers) primarily demands that filament plants increase operating rates. In July, PX and PTA units underwent large-scale maintenance, reducing loads to low levels. With the resumption of Strait shipping and the end of refinery maintenance after August, the current raw material shortage will gradually ease. If filament operating rates do not rise concurrently, PTA demand cannot recover, and upstream destocking will remain stalled.
Midstream filament producers have adopted a completely different strategy. In past years, every raw material price drop triggered filament promotions, compressing processing fees and reducing enterprises to mere 'carriers' for upstream. Now, filament producers are building a 'profit fortress' through output reduction—operating at 70% capacity to secure a processing margin of 500 yuan per ton, compared to just 100 yuan per ton at full capacity. The logic: once prices are cut, it triggers deeper downstream waiting ('If it drops today, will it drop again tomorrow?') and undermines the output reduction efforts.
Downstream weaving enterprises have the most direct demand: filament prices must return to reasonable levels. Before the oil price crash, downstream had long suffered from 'flour being more expensive than bread'—high upstream filament prices with no room to raise end-order prices. Now, with raw material costs collapsing but filaments refusing to follow, this 'upstream feasts while downstream burns its mouth on soup' situation has led weavers to vote with their feet: no price cuts, no purchases.
Industry Impact of the Deadlock
The current stalemate is creating a chain reaction. Filament producers won't cut prices, so downstream won't buy, keeping sales data depressed; low sales prevent inventory reduction, weakening the incentive to raise operating rates; and without higher filament operating rates, upstream PTA sales remain sluggish, frustrating destocking goals. This closed loop forms a self-reinforcing deadlock, with no party willing to concede first.
From an industry cycle perspective, this game could persist for weeks. Filament producers hold the upper hand through output reduction, but inventory pressure will build over time. Downstream enterprises have bargaining room, but if end-order gaps persist, their own operating rates will also come under threat.