After crude oil briefly surpassed $100 per barrel last week, it plunged over 6% in the new trading week on the 26th, triggering sharp volatility in polyester raw materials. PTA fell more than 5% in a single day, and some polyester plants cut selected polyester filament yarn grades by 50-100 RMB/ton. However, this seemingly positive signal for downstream buyers cannot be simply interpreted as an easing of cost pressure.
Background
The Trump administration postponed expanding military strikes on Iran due to a shortage of air defense interceptor missiles in the Pentagon. According to insiders, the US fears that escalation could provoke stronger retaliation and further deplete "Patriot" missile stocks. This news eased market tensions over the Middle East, pulling international oil prices from around $100 to about $90 per barrel.
From an industrial logic perspective, falling oil prices reduce production costs for naphtha, PX, and other polyester raw materials, theoretically driving down polyester filament yarn prices. However, industry data shows that the current operating rate for domestic direct-spun polyester filament yarn is only about 74.39%. Meanwhile, downstream draw-texturing machine utilization in Jiangsu and Zhejiang stands at 61.93%, and weaving utilization hovers around 50%. Production and sales are roughly balanced, giving polyester plants little incentive to cut prices aggressively.
Industry Impact
The price elasticity of polyester raw materials is being weakened by the highly concentrated upstream capacity structure. A few leading polyester companies hold strong pricing power and can effectively control prices and margins. Thus, even with periodic crude oil corrections, polyester filament yarn prices tend to be adjusted through short-term promotions rather than sustained declines. For weaving mills, this means costs will remain elevated.
Dyeing costs are also under pressure. Disperse black dye has been raised twice in the past month, cumulatively up by 5,000 RMB/ton. Some dyeing factories in Shaoxing have issued price hike notices, with light-medium shades up 100-300 RMB/ton and dark shades up 300-500 RMB/ton starting August 1. The dye industry also features an oligopolistic structure, leaving downstream dyeing plants with little bargaining power.
This asymmetry has led to cost inversions for many basic fabrics. During the current off-season, more weaving enterprises are choosing to cut production or take holidays, trying to trade time for space. However, shutdowns only temporarily avoid losses, not fundamentally solve the cost structure.