The renewed US-Iran conflict and the blockade of the Strait of Hormuz have sent shockwaves through the textile raw material market. On July 8, polyester filament yarn prices rebounded sharply after a prolonged decline, with some polyester factories raising prices twice in a single day. Downstream textile mills reacted swiftly, pushing the average production-sales ratio for polyester filament yarn to 361.9% on that day, and the weekly average to 132.7%. This data indicates a wave of panic buying rather than restocking driven by genuine demand recovery.
Background: Geopolitical Premium Returns
On July 8, the US Central Command announced a series of strikes against Iran in response to attacks on commercial shipping. Subsequently, an Iranian naval air defense officer was killed in a US strike on Jask, and the Strait of Hormuz was closed again. International oil prices surged, with US crude briefly returning to the $80 range, rising nearly 3% on July 12.
For the textile industry, oil price fluctuations directly impact the polyester supply chain. The painful memory of the early-year raw material surge remains fresh, and with current inventory levels low, fears of oil prices hitting $100 have spread rapidly. Although a large number of tankers had already left the strait before the blockade, preventing an immediate global oil shortage, geopolitical uncertainty alone is enough to roil markets.
Industry Impact: Production Cuts vs. Weak Demand
The polyester sector's price rally is underpinned by supply constraints. Data shows that the current capacity utilization rate for polyester filament yarn units is only 74.6%, far below last year's level. Upstream PTA and PX plants are undergoing frequent maintenance, tightening supply and supporting raw material prices. However, downstream weaving mills face a dilemma: orders are scarce during the off-season, and ramping up production risks inventory buildup; but halting operations could leave them exposed to further price increases. The volatility of raw material prices in the first half of the year has already strained weavers, and this event only adds to their caution.
Industry data suggests that the recent surge in production-sales ratios is driven more by panic than by genuine demand recovery. While the mindset of 'stocking up for safety' is understandable, blindly chasing high inventory levels could backfire.
Practical Advice
For Buyers - Monitor geopolitical developments, especially US-Iran negotiations, and avoid large-scale stockpiling until the situation clarifies. - Leverage the current high production-sales ratio to negotiate short-term price lock agreements with polyester factories. - Diversify raw material sourcing, considering alternative synthetic fibers to reduce exposure to single-variety volatility.
For Textile Mills - Control raw material inventory levels rationally to avoid excessive capital occupation from panic buying. - Strengthen communication with downstream clients and align production with actual orders to minimize finished goods inventory. - Track polyester unit operating rates; if supply continues to tighten, consider increasing safety stock days moderately.
In the short term, the downward trend in polyester filament yarn prices has been reversed, and the outlook is bullish. However, the long-term trajectory hinges on the evolution of the Strait of Hormuz situation. Textile companies should remain vigilant and respond to market fluctuations with rationality.