The renewed sound of gunfire near the Strait of Hormuz has once again rattled global energy markets. Brent crude surged past $86 per barrel, directly igniting a price rally in China's polyester chain—polyester filament yarn has risen for consecutive trading days since the start of this month, reversing the previous downtrend.
For the textile industry, this scene feels familiar. The early-year spike of 3,000 yuan per ton in polyester yarn within days still haunts many practitioners. However, a closer industry-level comparison reveals that beneath the surface similarity, the underlying logic has fundamentally shifted.
The most striking difference lies in inventory structure. According to publicly available data, current POY factory inventory stands at 26.4 days, FDY at 32.5 days, and DTY at 37.3 days. In contrast, right after the Chinese New Year holiday, these figures were only 18.7 days, 25 days, and 27.6 days respectively. This means the polyester sector now carries about 8-10 days more inventory, indicating significantly greater supply elasticity.
Meanwhile, downstream grey fabric inventories tell a different story. Current average inventory at weaving mills is about 17 days, compared to 24 days at the start of the year. Inventories have already shifted from upstream to downstream, and while weaving mills now hold relatively low stocks, their willingness to replenish remains tepid.
The key variable is orders. At the beginning of the year, textile companies were entering the peak 'Golden March and Silver April' season with substantial backlogs, creating rigid demand for raw materials. Now, the industry is in a traditional off-season, with loom utilization rates generally low. Purchases of polyester yarn are largely driven by just-in-time needs rather than proactive stockpiling. Demand-side momentum has significantly weakened.
A deeper transformation is occurring at the psychological level. When raw material prices first surged early this year, a popular saying circulated: 'Yarn is made of gold, and the fabric in the warehouse is also made of gold.' Many mills with inventory chose to hold back sales, expecting prices to rise further.
However, six months of market education have sobered participants: raw material price hikes can be swift, but passing those costs down to grey fabric and finished goods is a painful negotiation with downstream clients, often ending in compromise. Raising prices on old inventory is even harder.
This experience has reshaped behavior. The entire industry now prefers to hold cash and wait, rather than actively build inventory. Even as polyester yarn prices rise consecutively, weaving mills are buying only as needed, with little speculative buying. The market mood has shifted from 'fear of missing out' to 'fear of catching a falling knife.'
As raw material prices continue to climb, industry divergence will intensify. Large, well-capitalized weaving mills with stable customer bases can hedge using futures or long-term contracts. In contrast, many cash-strapped small and medium factories may be forced to cut production or even shut down.
On the macro front, an often-overlooked variable is the fragility of energy demand. Many countries have depleted their crude oil reserves and only partially replenished them, significantly reducing their ability to withstand supply shocks. If the Strait of Hormuz blockade persists, the ripple effects on global supply chains could be severe.
For textile exporters, this means both a potential acceleration of order transfers to China and a risk of suppressed overseas demand, possibly triggering inflation and financial contagion. As the blockade extends, the probability of black-swan events rises exponentially.
Practical Recommendations
#### For Buyers
- Current polyester yarn prices are at short-term highs; chasing rallies is risky. Purchase based on actual needs and avoid stockpiling.
- Monitor crude oil trends and geopolitical developments. If tensions ease, prices may retreat, offering opportunities for strategic replenishment.
- Negotiate short-term floating price agreements with suppliers to hedge against volatility.
#### For Exporters
- Assess the raw material cost exposure in existing orders and discuss price adjustment clauses with clients if necessary.
- Monitor the impact of Middle East tensions on shipping routes. Secure container space and freight rates in advance to avoid logistics disruptions.
- Diversify sourcing by adding recycled polyester or alternative fibers as a contingency to reduce single-feedstock dependency.