Brent crude oil broke through $94 per barrel intraday on July 22nd, pushing PX prices from 7,900 CNY/ton to 8,400 CNY/ton within a week. Polyester filament yarn POY inventories fell to 17.1 days, the lowest since late March this year. Yet, the comprehensive operating rate for weaving mills in Jiangsu and Zhejiang stands at only 53%—58%, with dyeing and printing even lower at 45%—52%.
Between the rise and fall, the polyester filament yarn industry is teetering on a fragile balance.
Cost Pass-Through: From Geopolitics to Chemicals
On July 22nd, international oil prices surged again due to geopolitical conflicts. Brent crude closed above $91.01 per barrel, hitting the $93—$94 range intraday, with WTI closing at $84.91. The triggers came from two directions: ongoing US-Iran military clashes lasting over ten days, and Houthi rebels declaring a blockade on Saudi maritime routes. The consequence was a 34% drop in traffic through the Red Sea's Bab el-Mandeb strait within two weeks.
This contraction in maritime routes not only raised the landed cost of crude oil itself but also inflated transportation costs and insurance premiums for all petrochemical intermediates. The Strait of Hormuz carries about one-fifth of the world's seaborne crude oil. As long as the expectation of a "supply cutoff" in this region persists, international oil prices will find it difficult to truly retreat.
Costs cascade down the fixed chain: crude oil → naphtha → PX → PTA → polyester → polyester filament yarn. Data from Chemnet.com for July 13-17 shows PX prices rose 6.33% week-over-week, 15.86% higher year-on-year. PTA increased from 5,898.50 CNY/ton to 5,985.91 CNY/ton, up 1.48% weekly and soaring 25.68% year-on-year. As the core raw material cost for PTA, the jump in PX prices directly compressed PTA's processing margins, forcing spot and futures quotes to follow passively.
Two often-overlooked "hidden drivers" in this round of cost transmission are the simultaneous rise in sea freight and insurance costs, and the uncertainty of arrival times due to reduced Red Sea channel efficiency. Together, they make the implicit procurement cost of PTA and PX higher than book values, putting more rigid pressure on polyester plants' raw material purchasing.
Polyester Segment: Inventory Drawdown and Price Support Behind Restocking Logic
Under the renewed cost pressure, the polyester filament yarn market saw clear volume and price increases this week. Conventional semi-dull POY and FDY were priced 200-250 CNY/ton higher than the previous week, while DTY rose 100-150 CNY/ton. In mainstream Jiangsu-Zhejiang specifications, POY 150D/48F traded in the 8,100-8,180 CNY/ton range, FDY 150D/96F around 8,300-8,380 CNY/ton, and DTY 150D low-elastic around 9,220-9,300 CNY/ton.
Inventory data provided more positive signals: POY, FDY, and DTY inventories fell to 17.1 days, 22.8 days, and 30.4 days respectively, down 0.6, 0.4, and 3.1 days from the previous week. POY inventory has dropped to its lowest level since late March this year. Industry operating rates edged up to 75.1%, still relatively low by historical standards for this period.
The core driver behind this destocking is not end-consumer demand recovery but speculative restocking by downstream customers. After the escalation of the US-Iran conflict, market expectations of further raw material price increases intensified, leading downstream texturizing and weaving mills to make concentrated purchases on Monday and Tuesday, with some specifications even seeing order queues. The spread between POY and PTA remained above 1,500 CNY/ton in July, significantly improving cash flow profits for polyester enterprises compared to before the March conflict.
However, the restocking behavior shows clear "pulse-like" characteristics. Although downstream texturizing and weaving operating rates recovered to 75% and 65%, up 1-2 percentage points from early July, they remain at low off-season levels. This suggests the sustainability of speculative restocking is questionable. Once cost-side support weakens, the pace of inventory drawdown may slow rapidly.
End-User Reality: Off-Season Underpinnings Unchanged, Price Hikes on Shaky Ground
Zooming in on final consumption, the textile industry remains in its traditional off-season. End-user grey fabric orders generally last less than 10 days. The comprehensive operating rate for weaving mills in Jiangsu and Zhejiang is only 53%-58%, with dyeing and printing even lower at 45%-52%. Downstream players show little enthusiasm for high-priced raw materials, essentially adopting a "buy-as-needed, zero-inventory" strategy.
This reveals a core contradiction: the current price increase for polyester filament yarn is essentially cost-push, not demand-pull. The cost transmission triggered by geopolitical events, combined with periodic downstream speculative restocking, has jointly pushed up prices and accelerated destocking. But genuine end-user demand has not seen substantive improvement, and the price rally lacks fundamental support from the consumer side.
Should the Middle East geopolitical premium fade—for instance, if the conflict de-escalates or Saudi maritime routes reopen—a retreat in crude oil prices would directly pull the cost floor from under PX and PTA, raising significant questions about whether polyester filament yarn prices can hold their current levels.
Outlook: Two Factors Determine Direction
In the short term, with geopolitical risks still present and oil prices maintaining a relatively strong stance, polyester filament yarn is likely to remain prone to increases and difficult to decline, with destocking and price support continuing. But whether prices can form a trend depends on two variables:
- The evolution of the Middle East situation, which determines how long the cost floor can hold.
- The extent of demand realization during the Q3 traditional peak season, which will determine whether the downstream restocking logic shifts from speculative to substantive.
If peak season demand materializes as expected, the industry's profit elasticity is likely to amplify. If the peak season disappoints, the current price accumulation and inventory drawdown could quickly reverse, turning into a new round of inventory pressure.