Crude oil prices have surged past $86, and the Strait of Hormuz is once again at the center of geopolitical tensions, triggering consecutive daily hikes in polyester filament yarn. These signals naturally evoke memories of the explosive rally earlier this year. But a closer look at inventory structures, demand rhythms, and mill sentiment reveals that the underlying logic of this price rise has fundamentally shifted.
Inventory Structure: A Widening Gap
According to public data from China Customs, as of last week, polyester POY mill inventories stood at 26.4 days, FDY at 32.5 days, and DTY at 37.3 days. Compared to post-Lunar New Year levels of 18.7, 25, and 27.6 days respectively, inventories have increased by 8-10 days across all categories. Meanwhile, greige fabric inventories at weaving mills averaged just 17 days, far below the 24 days recorded in early 2024.
This divergence—high raw material stocks paired with low fabric inventories—means upstream polyester plants face destocking pressure, while downstream weavers hold limited finished goods and have little incentive to restock. During the early-year rally, weavers, flush with orders and fabric stocks, were willing to chase higher prices. Today, they prefer to consume existing stocks and adopt a wait-and-see approach.
Demand Side: Slack Season Weighs on Orders
We are currently in the traditional off-season for textiles, with loom utilization rates generally low and new orders significantly weaker than in early 2024. Back then, mills had a backlog of orders to fulfill, creating genuine raw material procurement needs. Now, end-brand and trader order placements have slowed, sharply reducing weavers' demand for inputs.
Industry data shows that when greige fabric inventories were high earlier this year, mills were better able to absorb raw material price hikes by passing costs through to finished goods. But with current low fabric stocks, weavers lack a buffer; they are forced to either accept higher costs or cut purchases, intensifying price negotiations along the supply chain.
Market Sentiment: From Hoarding to Caution
During the early-year rally, a popular saying among textile mills was, "Yarn is made of gold, and the fabric in the warehouse is also gold." Some companies hoarded inventory, expecting further price gains. However, after nearly six months of market education, mills have realized that passing raw material cost increases to fabric and garment buyers is extremely difficult. Customers resist price hikes fiercely, and negotiations often end in compromise.
This shift in perception has fundamentally altered behavior. Across the industry, companies now avoid building inventories and prefer to hold cash. Even as polyester prices rise consecutively, weavers purchase only as needed, avoiding stockpiling. This reversal in sentiment means the current rally lacks the speculative momentum that drove the earlier surge, casting doubt on its sustainability.
Macro Variables: Rising Probability of Black Swan Events
From a broader perspective, a prolonged closure of the Strait of Hormuz could trigger cascading effects. Many countries' crude oil inventories are already low, and the current replenishment cycle has been incomplete, reducing overall resilience. If the blockade persists, energy prices could spike further, fueling global inflation and increasing financial market volatility.
For the textile industry, this external shock has dual implications: on one hand, some overseas production capacity may stall due to energy shortages, accelerating order transfers to China; on the other hand, overseas consumer demand—especially in inflation-hit Western markets—could weaken further. These opposing forces make the export outlook more complex.