Crude oil has surged past $86 as the Strait of Hormuz blockade reignites geopolitical tensions, and polyester filament yarn has been rising for consecutive trading days since the 8th. But this time, the textile industry faces a vastly different landscape: off-season demand, higher raw material inventories, and a market mentality that has shifted from hoarding to caution.
Inventory and Demand: A Different Starting Point
During the early-year rally, polyester filament inventories were low: POY at 18.7 days, FDY at 25 days, and DTY at 27.6 days, while greige fabric stocks stood at a high of 24 days. Textile mills had abundant orders and were forced to chase rising raw material prices, creating a frenzy where 'yarn was treated like gold.'
Today, the inventory picture is reversed. Polyester filament stocks have ballooned to 26.4 days for POY, 32.5 days for FDY, and 37.3 days for DTY — roughly 10 days higher than in early 2024. Meanwhile, greige fabric inventories have dropped to just 17 days, indicating that downstream weaving mills have actively destocked. Crucially, the current season is a traditional lull, with low loom operating rates and significantly weaker demand for raw materials.
This means that even if crude and polyester prices rise, downstream willingness and capacity to absorb higher costs are far weaker than earlier this year.
Mindset Shift: From Hoarding to Waiting
Six months of sustained high raw material prices have fundamentally altered industry behavior. Early this year, many mills with inventory chose to hoard, betting that fabric prices would follow yarn higher. The reality proved otherwise: while raw material prices rose sharply, the pass-through to greige fabric and finished goods was excruciatingly slow, often ending in compromise with buyers.
Once the industry realized that 'yarn rises fast, but fabric prices barely budge,' the logic changed. Now, the prevailing attitude is to hold cash and wait. This psychological shift will cap the duration and magnitude of the current price rally.
Macro Variables: Rising Black Swan Risks
Zooming out, another risk is building. Many countries have depleted their crude oil reserves and have only partially replenished them, leaving them with limited buffer against supply disruptions. If the Strait of Hormuz blockade persists, the knock-on effects on global energy supply chains could be more severe than anticipated.
For China's textile sector, this presents a double-edged sword: on one hand, production disruptions in other nations could accelerate order migration to China; on the other hand, overseas demand may be further suppressed, potentially triggering inflation and financial risks. As the blockade extends, the probability of black swan events rises exponentially.
Polarization Intensifies: Crisis and Opportunity
Continued raw material price increases will likely widen the gap between winners and losers:
- Large mills with stable orders and cash flow can lock in lower-priced raw materials and gain a cost advantage in subsequent orders.
- Small and medium weaving mills face a margin squeeze as raw material costs rise but fabric prices remain stagnant, forcing some to cut production or shut down.
- Foreign trade companies must watch for order cancellations or price pressure from overseas clients grappling with inflation and slowing demand.