The rapid decline in international oil prices following the US-Iran peace agreement and the reopening of the Strait of Hormuz have not brought the expected market rally to the polyester industry chain. Instead, a three-way game over volume, price, and profit has emerged among upstream raw material suppliers, midstream filament yarn producers, and downstream weaving mills, creating a short-term deadlock.
Divergent Interests After Cost Collapse
The collapse in oil prices has directly reduced polyester raw material costs, but each segment of the chain feels the impact differently. Upstream PX and PTA producers conducted large-scale maintenance in July, lowering operating rates, but supply is expected to ease after August as refineries restart and shipping through the Strait resumes. The upstream sector's primary goal is for filament producers to raise operating rates to digest PTA inventory and repair the forward supply-demand balance.
For downstream weaving mills, the previous dilemma of 'flour being more expensive than bread' has not eased after the oil price drop. Filament prices have remained relatively sticky, leaving weaving operations still generally loss-making on a spot basis. Downstream mills insist filament prices must 'catch down' to a reasonable level before they will restock. In their view, the current high processing margins at the filament stage are unreasonable, with upstream taking the meat and downstream only getting hot soup.
Filament Production Cuts: The Hard Constraint
The most aggressive strategy comes from filament producers, who are actively cutting output to preserve processing margins. In past years, filament producers would cut prices to stimulate sales whenever raw material costs fell, only to see their processing margins squeezed to near zero. Now, they have chosen to run at around 70% capacity, sacrificing volume for higher unit profits—earning 500 yuan per ton at 70% load is more attractive than 100 yuan per ton at full capacity.
This strategy directly blocks both upstream and downstream. Without significant price cuts from filament producers, downstream mills refuse to buy, preventing sales volume from picking up. Without sales, filament inventory cannot be reduced, making it impossible to raise operating rates. Without higher filament operating rates, upstream PTA sales remain weak, frustrating the upstream's desire to destock. The three parties' demands form a closed loop, with no one willing to make the first move in the short term.
Core of the Game: Inventory and Operating Rate Seesaw
The market's focus is now on changes in filament inventory and operating rate adjustments. If filament inventory continues to accumulate, producers may be forced to cut prices to free up cash, opening a restocking window for downstream mills and allowing upstream to destock. Conversely, if downstream mills are forced to accept current filament prices due to recovering export orders or improving domestic demand, filament producers will maintain their profit-protecting strategy, and upstream destocking will proceed more slowly.
Industry data shows inventory pressure is diverging across the chain. Filament producers maintain low inventory through output cuts, but downstream weaving mills also hold low stocks, with both sides waiting for the other to blink. The outcome of this game depends on which party faces tighter cash flow and is more sensitive to market changes.