Hormuz Strait Turmoil: The Industrial Logic Behind Panic Buying in Polyester Filament Yarn

As the military standoff between the US and Iran in the Strait of Hormuz escalates, international oil prices surged, driving the polyester filament yarn market to a single-day production-sales ratio of 361.9% on July 8, with a weekly average of 132.7%. This is not a signal of order recovery but a panic buying spree triggered by geopolitical risk.

Background

On July 8, the US Central Command announced a series of strikes against Iran in response to attacks on commercial shipping. An Iranian naval air defense officer was killed in subsequent clashes, and the Strait of Hormuz was once again closed. As a result, US crude oil prices briefly returned to the $80 range, with a nearly 3% gain on July 12.

For the textile industry, the direct impact hit the polyester supply chain. After a period of continuous declines and promotions, polyester filament yarn prices reversed sharply on July 8-9, with some factories raising prices twice in a single day. The previous weakness was completely overturned.

Industrial Impact

The supply-side contraction on the polyester end provided fundamental support for the price rebound. Industry data shows that current polyester yarn capacity utilization is only 74.6%, far below last year's level. Frequent maintenance at upstream PTA and PX plants has made feedstock prices more sensitive to crude oil fluctuations. When oil costs rise, polyester mills have sufficient pricing power to pass on costs downstream.

However, downstream weaving mills face a dilemma. It is the traditional off-season with few orders; ramping up production means inventory risk, while shutting down risks missing further price increases. The first half of the year saw volatile raw material prices that exhausted weavers. The current panic buying is driven more by expectations that oil could hit $100 than by actual demand.

Notably, a large number of oil tankers had already exited the Strait before its closure, preventing extreme supply shortages. The market generally expects the blockade to be short-lived, implying a potential pullback after the initial spike. For textile firms, chasing prices now could lead to cost inversion later.

Practical Advice

For Buyers - Distinguish panic buying from genuine demand: The current high production-sales ratio reflects inventory anxiety, not order growth. Purchase in batches based on actual production schedules to avoid overstocking. - Monitor geopolitical dynamics: US-Iran conflicts follow a 'fight-talk' pattern, with oil price spikes being short-term. Set price alerts and replenish during dips. - Evaluate alternative materials: If polyester prices remain high, increase procurement of substitutes like viscose or cotton to diversify cost risk.

For Mills - Control finished goods inventory: Without clear downstream order improvement, avoid expanding capacity blindly. Prevent the 'rising raw materials, falling finished goods' trap. - Lock in forward order prices: Negotiate short-term price agreements with customers to share raw material volatility risk, or adopt floating pricing mechanisms. - Optimize inventory management: Extend raw material inventory cycles from 7 to 14 days, but avoid exceeding 30 days, to buffer short-term fluctuations while retaining flexibility for corrections.