The re-blockade of the Strait of Hormuz triggered a sharp rally in the polyester supply chain in early July. International oil prices briefly returned to the $80 range, polyester filament yarn prices rebounded, and downstream textile mills rushed to purchase, pushing the daily production-sales ratio to 361.9%. But how long can this geopolitical rally last?
Background
On July 8, U.S. Central Command announced strikes against Iran in response to attacks on commercial shipping. Iran then blocked the Strait of Hormuz, and an Iranian naval officer was killed in the U.S. strike. Oil prices rose nearly 3% on July 12, with WTI crude back above $80 per barrel.
The polyester chain reacted swiftly. After days of decline, polyester filament yarn prices rebounded on July 8 and continued rising on July 9, with some plants raising prices twice in one day. The earlier downtrend was completely reversed as market sentiment shifted from wait-and-see to panic buying.
Industry Impact
The rally is fundamentally panic-driven. Downstream weaving mills have low raw material inventories, and the memory of the early-year price surge is still fresh. With thin orders in the off-season, mills face a dilemma: risk missing further price hikes if they don't buy now, or risk holding costly inventory if demand doesn't recover. The 361.9% production-sales ratio on July 8, with a weekly average of 132.7%, shows that buying was concentrated in an emotional spike, not a demand recovery.
Supply contraction on the polyester side supports the price rise. Current polyester filament capacity utilization is only 74.6%, far below last year's level. Upstream PTA and PX maintenance is frequent, tightening supply. But the weaving side is struggling—low off-season orders make running machines risky, while stopping risks cost increases. Raw material prices have been volatile in the first half, exhausting many mills.
From a broader perspective, many oil tankers had already left the Strait before the blockade, providing a short-term buffer for global crude supply. Thus, oil prices haven't surged to $100 as before. The market generally expects the blockade to be temporary, but the long-term trend depends on whether the US-Iran conflict escalates.