Crude oil surged past $86, and polyester filament yarn rose for consecutive trading days—the textile industry once again faces a raw material cost spike. But this time, the reaction across the supply chain is markedly different from early this year: higher raw material inventories, lower grey fabric stocks, and weaker downstream demand. The market is voting with its feet, proving that the cost pass-through mechanism is breaking down.
Raw Material Surge and Inventory Divergence
After Iran announced a temporary closure of the Strait of Hormuz, Brent crude jumped nearly 10% on the 13th, the biggest single-day gain since June. The U.S. reinstated a naval blockade and briefly proposed a 20% fee on cargo transiting the strait. Although the fee was withdrawn the next day, Iran declared the previous memorandum of understanding null and void, escalating geopolitical risks.
Polyester filament yarn began rising on the 8th and has continued upward for several days, reversing the earlier downtrend. However, compared with early this year, polyester plants now carry much heavier inventories: POY at 26.4 days, FDY at 32.5 days, and DTY at 37.3 days—roughly 8, 7, and 10 days higher, respectively. This suggests the current price hike is purely cost-driven, not demand-led.
Tepid Downstream and Shifted Sentiment
Grey fabric inventories average 17 days, well below the 24-day level at the beginning of the year. On the surface, this looks like successful destocking. But the underlying reality is that weaving mills have reduced raw material purchases due to insufficient orders and low operating rates. The traditional off-season, combined with weak overseas demand, leaves mills with little appetite to buy expensive inputs.
More importantly, market sentiment has undergone a fundamental shift. During the early-year rally, many textile firms hoarded finished fabrics, hoping prices would rise further. But months of practice have shown that while raw material price hikes are swift and decisive, passing those costs to grey fabrics and finished goods is a painful, drawn-out negotiation with downstream buyers. Even raising prices on old inventory has proven extremely difficult.
As a result, the industry now prefers to hold cash and wait, rather than chase rising prices. This reversal means that raw material cost increases have diminishing pull on downstream prices.
Widening Polarization and Black Swan Risks
Looking ahead, continued raw material cost increases will further widen the gap between industry players. Well-capitalized companies with stable client bases can hedge risks through futures contracts or long-term supply agreements. Small and medium-sized weaving mills and traders, however, face the double squeeze of rising costs and shrinking orders.
On the macro front, the longer the Strait of Hormuz blockade lasts, the larger the global crude supply gap becomes. Many countries already have low crude inventories, leaving them with limited buffer. A prolonged blockade could trigger a cascade of effects: on one hand, production disruptions in some nations may accelerate order transfers to China; on the other, overseas demand could be further suppressed, potentially fueling inflation and triggering global financial risks.