On the morning of August 3, international oil prices plunged, with Brent crude for October delivery falling as much as 7.3% to $81.55 per barrel, while WTI crude dropped below $80 per barrel, down 6.25%. Yet during the same period of violent upstream volatility, polyester filament yarn prices showed rare resilience—daily fluctuations were generally limited to 50-100 yuan per ton, and in some cases, prices remained unchanged even as crude collapsed. This divergence between upstream and downstream is reshaping the pricing logic of textile raw materials.
Background
The immediate trigger for this oil price slump was the Trump administration's repeated reversals on Middle East policy. On July 31, the U.S. signaled a possible strike on Iranian energy facilities, but by August 2, it claimed that negotiations with Iran would begin the next day, mentioning a possible agreement on the Strait of Hormuz. This pattern of "threat then reversal" is not new, but financial markets still react each time, causing sharp crude price swings.
Notably, this volatility has not effectively transmitted to polyester filament yarn. Since the previous U.S.-Iran conflict, yarn prices have maintained a narrow range, with only minimal adjustments even when crude surged or crashed. This phenomenon reflects a temporary decoupling between yarn's supply-demand fundamentals and crude cost logic.
Industrial Impact
What does the yarn's independent trend mean for downstream weavers? First, it changes procurement decision-making logic. During the current off-season, weaving machine operating rates are generally below 50%, and many enterprises without stable orders have reduced or halted production. Raw material purchases are mostly for essential replenishment. In this state, small price fluctuations have limited impact on actual purchase volumes, but if volatility becomes extreme, even essential buyers may hold back.
More critical is the change in inventory structure. Due to large-scale production cuts in the weaving sector since the first half of this year, average grey fabric inventories have fallen by more than 10 days compared to the same period last year. While this may not fully cover the first wave of demand recovery, it is enough to alter market expectations—once demand picks up, grey fabric prices could rise in advance, rather than waiting for inventories to deplete. For buyers, this means bargaining space may narrow.
On the supply side, disrupted oil transport has raised shipping costs, and even if some crude gets through, landed costs are significantly higher, which could exacerbate energy shortages in some countries in the medium term, supporting chemical fiber raw material costs. But in the short term, Trump's policy reversals make a single-direction crude trend unlikely, and yarn is likely to remain volatile.
Practical Advice
For Buyers - Maintain a just-in-time replenishment strategy during the off-season, avoiding excessive inventory buildup, but closely monitor demand recovery signals in late August. - Watch the declining grey fabric inventory trend; if hoarding signs appear, consider locking in purchases of some regular specifications in advance. - Use the current low yarn price window to negotiate short-term price-lock agreements with suppliers, hedging against sudden crude-driven cost spikes.
For Trading Companies - Include raw material price fluctuation clauses in quotations, specifying adjustment mechanisms when yarn prices move beyond a certain threshold, to mitigate both raw material and exchange rate risks. - Closely track the Strait of Hormuz situation and changes in oil transport costs, assess their impact on shipping fees and delivery times, and prepare logistics contingency plans. - Given the potential shift toward a seller's market, adjust order acceptance strategies: for long-term or large orders, consider batch purchasing and phased production to balance risk and reward.
Time remains the biggest variable. Short-term crude volatility and yarn resilience coexist, but if demand shows signs of recovery in late August, pricing power may shift toward sellers. Textile enterprises should prepare in advance to stay ahead in this changing landscape.