Every sharp swing in oil prices leaves a mark on polyester filament yarn prices. In mid-July, news of the Strait of Hormuz blockade sent international oil prices surging, shaking the polyester supply chain. After weeks of consecutive decline, polyester filament yarn prices reversed sharply, with some polyester factories raising quotes twice in a single day. Downstream textile mills reacted swiftly: on July 8, the average production-sales ratio for polyester filament yarn soared to 361.9%, with the weekly average reaching 132.7%, a clear sign of panic buying.
Background: Geopolitics and Raw Material Linkages
The trigger for this round of conflict was Iran's attempt to charge tolls on commercial vessels in the Strait of Hormuz, met with a strong U.S. response that escalated into military strikes. The U.S. Central Command announced attacks on Iran on July 8, and an Iranian naval officer was killed, leading to the blockade. Although a large number of tankers had already exited the strait before the blockade, easing short-term supply fears, oil prices still jumped, with WTI crude briefly returning to the $80 range and rising nearly 3% on July 12.
For the textile industry, this is not an isolated event. Memories of the raw material spike earlier this year remain fresh, making companies highly sensitive to geopolitical risks. Polyester plant capacity utilization currently stands at only 74.6%, far below last year's level, while upstream PTA and PX maintenance is frequent, keeping supply tight. The oil price rise provided polyester factories with a window to raise prices, reversing the earlier promotional and declining trend.
Industry Impact: Panic Buying Amid Supply-Demand Mismatch
This production-sales surge is essentially a stockpiling move driven by expectations, not a genuine recovery in end-user demand. Downstream weaving mills face a dilemma: with few orders in the off-season, running machines to build inventory is risky, but failing to stock up could leave them vulnerable to further price hikes. After months of volatile raw material prices in the first half of the year, mills are exhausted, and this time they chose short-term hoarding to hedge against risk.
A 361.9% production-sales ratio means purchases far exceeded actual consumption, and the excess will be added to social inventory. If geopolitical tensions ease and oil prices retreat, this inventory could become a drag on prices. The current rally relies more on supply contraction and panic than on genuine demand. Textile companies should be cautious: if the situation cools, polyester filament prices may face downward pressure.
Market Outlook: Can Oil Prices Stay High?
The market generally believes the Strait of Hormuz blockade will not last long. US-Iran relations have long followed a pattern of alternating conflict and negotiation. Although this round has escalated, neither side wants a full-scale war. The fact that many tankers had already left the strait before the blockade means global crude supply is not severely disrupted, explaining why oil prices did not spike to $100 as they did earlier this year.
In the long run, crude oil prices will depend on the evolution of the geopolitical situation. If conflict persists or expands, oil prices could rise further, pushing up polyester raw material costs. For textile companies, the short-term downward trend in polyester filament prices has been reversed, and prices are likely to remain strong for a while. Companies must closely monitor Middle East developments and adjust procurement strategies flexibly.