The Strait of Hormuz is once again a flashpoint for global textile raw material markets. In mid-July, a military clash between the US and Iran over transit fees led to the strait's re-blockade, sending international oil prices surging, with US crude briefly returning to the $80 range. The polyester chain immediately reacted, with polyester filament yarn (PFY) prices reversing a prolonged downtrend, and some polyester plants even raising prices twice in a single day.
Panic Buying Drives Sales-to-Output Ratio
Downstream textile companies responded swiftly. On July 8, the average sales-to-output ratio for PFY soared to 361.9%, with the weekly average reaching 132.7%. This surge reflects the industry's lingering trauma from the sharp raw material price spike earlier this year. With most companies holding low inventory levels, the fear that oil could hit $100 again has triggered a rush to stockpile, even during the traditional slack season.
However, this buying spree is not driven by a recovery in end-user orders. Industry data shows that current polyester plant capacity utilization is only 74.6%, well below last year's level, while upstream PTA and PX maintenance is also frequent, tightening supply. This supply-side contraction supports prices, but downstream weaving mills face a dilemma: orders are scarce, and running machines to build inventory risks capital tie-up and potential losses, while stopping production could mean missing out on further price gains. The volatile first half of the year has left weaving mills cautious, and their current strategy is to take things step by step.
The Oil Price and Geopolitical Game
Market players have come to understand the US-Iran conflict pattern: a mix of fighting and negotiation. The latest clash stemmed from Iran's attempt to charge fees for ships passing through the Strait of Hormuz, which the US rejected, leading to military skirmishes and the strait's closure. Despite the breakdown of a previous memorandum of understanding, the market expects the blockade to be temporary. Crucially, a large number of oil tankers had already left the strait before the blockade, buffering global oil supplies, so prices have not surged to $100 as they did earlier this year.
Looking ahead, whether oil prices can continue to rise depends on further escalation. If the conflict remains localized, oil is likely to fluctuate around $80; if it expands, the $100 mark could be tested. For the textile industry, this means long-term raw material cost uncertainty.
Short-Term Strength, But Caution Warranted
From an industrial chain perspective, rising oil prices push up PFY costs through the polyester chain, and with supply cuts, prices are unlikely to fall significantly in the short term. However, the sustainability of panic buying is questionable: if geopolitical tensions ease or oil prices retreat, companies that have stockpiled may face inventory devaluation risks. China Customs data shows that the growth rate of textile raw material imports slowed in the first half of this year, reflecting weak end-user demand.
For textile companies, the most rational strategy is to monitor Middle East developments closely and avoid emotional chasing. Short-term inventory increases can hedge risks, but positions should not be excessive, allowing room to respond to price corrections.