The re-blockade of the Strait of Hormuz has once again rippled through the polyester industry chain, which had just calmed down. International oil prices rose sharply, with West Texas Intermediate crude briefly returning to the $80/barrel range, and polyester filament prices rebounded, quickly reversing the previous decline.
Background
The direct trigger for this escalation was a US military strike on Iran, after which Iran re-closed the Strait of Hormuz. On July 8, the US Central Command announced a series of strikes against Iran, and on July 12, an Iranian naval air defense officer was killed in the attack. As a result, international oil prices rose by nearly 3%, rapidly transmitting to the downstream chemical fiber market.
Industry Impact
Polyester filament prices rebounded suddenly on July 8 and continued to rise on July 9, with some polyester factories raising prices twice in one day. Downstream companies, fearing continued raw material price increases, began panic buying. On July 8, the average production-sales ratio of polyester filament reached 361.9%, and the weekly average reached 132.7%, significantly higher than previous levels.
The supply contraction on the polyester side provided support for the price increase. Data shows that the current utilization rate of polyester filament equipment is only 74.6%, far below the level of the same period last year. Frequent maintenance of upstream PTA and PX facilities further tightened supply and supported raw material prices.
However, downstream weaving companies face a dilemma. The current off-season has resulted in insufficient orders, and starting production to build inventory carries the risk of stockpiling. Yet, if they stop production, they fear further raw material price increases. The significant price volatility of raw materials in the first half of the year has already exhausted weaving companies, forcing them to adopt a wait-and-see approach.
Short-Term Outlook and Long-Term Concerns
In the short term, the downward trend of polyester filament has been reversed, and the market is likely to remain strong in the coming period. However, the market generally believes that this production-sales surge is more driven by panic buying, and the actual recovery of end-user demand remains questionable.
Notably, a large number of oil tankers had already left the Strait of Hormuz before the blockade, which alleviated the global crude oil supply shortage to some extent. As a result, oil prices did not surge to $100/barrel as in previous conflicts. The market expects the blockade may not last long.