International crude oil prices have retreated from above $100 to around $90, triggering a 5% single-day drop in PTA and prompting some polyester plants to cut polyester filament yarn prices by 50-100 yuan/ton. However, this price reduction has not brought relief to downstream weaving mills, as rising dye costs are offsetting all upstream concessions.
The Pricing Logic Behind Upstream Volatility
The immediate trigger for the sharp oil price decline is a marginal easing of geopolitical tensions. The US-Iran conflict has shown signs of de-escalation, temporarily alleviating concerns about shipping disruptions in the Strait of Hormuz. Yet oil at $90 remains near decade highs, providing persistent cost support for polyester feedstocks.
PTA and polyester yarn price elasticity is largely driven by short-term sentiment. Polyester plant operating rates stand at 74.39%, indicating that capacity is not fully utilized and giving producers room to manage supply. When feedstock costs dip, mills tend to use limited-time promotions to clear inventory rather than start a sustained price reduction cycle. The 50-100 yuan/ton cut in polyester yarn is seen within the industry as a tentative destocking move, not a reversal of the price trend.
Pressure from dye costs is more rigid. Disperse black dye has been raised twice in one month, with a cumulative increase of 5,000 yuan/ton. Dyeing mills in Shaoxing have issued August price hike notices, with light-medium colors up 100-300 yuan/ton and dark colors up 300-500 yuan/ton. The dye industry is also oligopolistic, with a few leading players wielding strong control over pricing and margins, leaving downstream printing and dyeing mills with little bargaining power.
Weaving Mills Forced to Cut Output
The dual squeeze from polyester and dye costs has severely deteriorated the cost structure for weaving enterprises. Basic fabric products are now selling at prices below total input costs, creating a situation where the more you produce, the bigger the loss. This is forcing mills to proactively scale back capacity.
Operating data shows that texturing machine utilization in Jiangsu and Zhejiang has fallen to 61.93%, while weaving utilization hovers around 50%. These levels are significantly lower than a year ago, reflecting an industry-wide adjustment driven by weak end-demand and cost pressure. Polyester plants and weaving mills are roughly matching production with sales, avoiding large inventory builds, which in turn reduces the incentive for polyester mills to cut prices further.
Some weaving mills are opting for temporary shutdowns, a passive strategy of 'trading time for space.' The rationale is twofold: hope for a sustained decline in crude oil prices to lower polyester feedstock costs, and anticipation of autumn/winter order pickup to absorb high-cost inventory. However, given the current geopolitical landscape, US-Iran trust has been severely eroded, and a new agreement is unlikely in the short term, meaning oil prices will likely remain volatile and elevated.
Key Variables Ahead
The likelihood of a single-direction decline in international oil prices is low; a continuation of the recent volatile range is more probable. While the US military's air defense munitions in the Middle East are temporarily stretched, the resources needed to maintain a blockade of the Strait are far less than those for a full-scale strike, so constrained shipping capacity will continue to provide a floor for oil prices. Furthermore, the unpredictable decision-making style of the Trump administration means any sudden statement could trigger sharp oil price swings, adding persistent uncertainty to textile mills' procurement planning.
For textile enterprises, the most practical response is to remain flexible in raw material procurement and avoid heavy stockpiling at high prices. Simultaneously, shifting product mix toward higher-value, differentiated fabrics can enhance the ability to absorb upstream cost increases.