The US-Iran peace agreement and the gradual reopening of the Strait of Hormuz have sent international oil prices tumbling back to pre-war levels. However, for the polyester industry, this cost collapse has not brought the anticipated relief but instead ignited a fierce three-way struggle over volume, price, and profit. Upstream raw material suppliers, mid-stream filament producers, and downstream weavers hold completely divergent demands, with filament enterprises using production cuts as a powerful lever to grip the chain's vital points, creating a rare deadlock.
The Interest Triangle After Cost Collapse
Before the oil price crash, downstream weaving mills suffered from a situation where "flour was more expensive than bread"—filament prices were high, but orders could not be raised, leading to losses on every new order. Now that raw material costs have fallen sharply, downstream players should be relieved, but filament prices have remained stubbornly high, with processing margins at elevated levels. From the downstream perspective, this "upstream feasts while downstream barely gets a sip" is unreasonable, so they are waiting for filament prices to "catch down" to a rational level before entering the market to restock.
The upstream raw material segment is equally anxious. In July, large-scale maintenance at PX and PTA plants reduced operating rates, but from August onward, as shipping in the Strait normalizes and refineries resume operations, the raw material shortage will gradually ease. The core demand of raw material suppliers is for filament producers to raise operating rates, because only then can PTA demand recover, enabling destocking and balance sheet repair. The most effective lever to boost filament production is promotional sales—raw material suppliers are eagerly hoping for a major filament sale.
Filament producers have a completely different logic. In past years, every time raw material prices fell, they cut filament prices to boost sales, only to see their processing margins squeezed to near zero, making them mere "porters" for upstream. Now they are determined to protect the profit floor they have painstakingly built—running at 70% capacity with a margin of RMB 500 per ton is far better than running at full capacity with only RMB 100 per ton. If they cut prices now, it would trigger deeper downstream wait-and-see behavior ("if it drops today, it might drop tomorrow") and undo all their production cut efforts.
The Deadlock Cycle and Industrial Transmission
The current three-way game has formed a closed-loop deadlock: filament producers refuse to cut prices, so downstream stays out of the market, sales remain sluggish; weak sales prevent inventory drawdown, making it impossible to raise operating rates; without higher filament output, upstream PTA cannot be sold, frustrating destocking goals. No party is willing to make the first move, leaving the chain in a fragile equilibrium.
Industry data suggests this standoff has persisted for weeks. Public reports indicate downstream weaving mill operating rates remain low, with orders mostly short-term and small-lot, while filament inventories have been accumulating. If the deadlock continues, a chain reaction could unfold: filament producers may protect margins short-term but face cash flow pressure from rising inventories; downstream players may further cut capacity or switch to alternative fabrics due to raw material uncertainty; and upstream PTA plants, after completing maintenance, could face severe supply-demand imbalance if demand fails to recover.
Path to Resolution: Who Blinks First?
Historical precedent suggests that the party with the highest inventory pressure usually concedes first. Currently, filament inventories are manageable, and the production cut strategy has sent a clear signal to the market. The downstream breaking point depends on whether end-product prices can be passed through—if apparel brands accept price hikes, restocking will accelerate; if not, downstream will continue to wait.
A key variable for raw materials is the trajectory of international oil prices and the pace of overseas PX supply recovery. If Strait shipping fully normalizes by August, increased PX arrivals will further weaken PTA cost support, potentially squeezing filament producers from both the cost and demand sides, making the margin-protection strategy unsustainable.
Another potential catalyst is policy intervention. If the standoff persists and impacts employment and exports, local governments or industry associations may step in to mediate, pushing filament producers to offer moderate price cuts to revive downstream production. However, based on current statements, a voluntary breakthrough appears unlikely in the near term.