The renewed US-Iran conflict has escalated, leading to a re-blockade of the Strait of Hormuz and sending international oil prices surging. West Texas Intermediate crude briefly returned to the $80 per barrel range, with a single-day gain of nearly 3% on July 12. For the textile industry already suffering in the off-season, this is akin to an unexpected 'cost tsunami.' The polyester chain was hit first, with polyester filament yarn (POY) prices rebounding sharply on July 8 after a period of continuous decline. Some polyester plants even raised prices twice in one day, completely reversing the previous downturn.
Panic Buying Ignites Procurement Wave
Faced with clear signals of rising oil prices, downstream weaving mills reacted swiftly and intensely. On July 8, the average production-sales ratio for POY soared to 361.9%, and the weekly average reached 132.7%. This figure reflects widespread panic restocking among mills, still haunted by memories of the raw material price spike earlier this year. Many companies currently hold low raw material inventories, and if oil prices truly break $100, mills without stock would face uncontrollable cost risks. Consequently, even during the traditional off-season with sparse orders, companies feel compelled to 'stock up first.'
Production Cuts Support Price Hikes
This round of polyester price increases is not entirely unfounded. Industry data shows that current capacity utilization for polyester filament plants is only 74.6%, significantly lower than the same period last year. Upstream PTA and PX plants are also undergoing frequent maintenance, providing fundamental support for raw material prices. However, downstream weaving mills are caught in a dilemma: with few off-season orders, running machines risks building up inventory; but stopping production means potentially facing even higher raw material costs later. The volatile raw material prices in the first half of the year have already exhausted weaving mills, forcing them to take a day-by-day approach. Panic buying, however, is clearly unsustainable.
Will Oil Prices Return to $100?
Looking at the long-term US-Iran dynamic, conflict and negotiation are the norm. The current trigger is Iran's attempt to levy fees on vessels passing through the Strait of Hormuz, met with a strong US military response, leading to a new blockade. Unlike the previous incident, a large number of oil tankers had already left the strait before the blockade, alleviating short-term global supply shortages and preventing an immediate spike to $100. The market generally expects the blockade to be temporary, but the long-term oil price trajectory depends on whether geopolitical tensions escalate further.
Deeper Impact on the Textile Chain
This event clearly reveals that textile raw material costs are now highly tied to geopolitical risks. For polyester plants, short-term price hikes relieve inventory pressure, but are unsustainable without end-demand recovery. For weaving and garment companies, raw material cost uncertainty is becoming a more daunting challenge than order shortages. Procurement decisions are no longer simple 'buy on rising prices' but a complex game involving geopolitical analysis, crude oil futures, and inventory management.