Following the escalation of geopolitical conflict, the price increases from crude oil down through the polyester chain have narrowed. The inability to smoothly pass on terminal cost pressures has led to a pattern where polyester operating rates and downstream loom operating rates initially rose but subsequently declined, deviating from typical seasonal trends.

There is difficulty in transmitting cost pressures along the polyester product chain. As of April 7th, the prices of polyester products had increased by 27% to 41% compared to February 28th. Polyester bottle chip experienced the largest price gain, while polyester staple fiber saw the smallest increase. The primary driver of this price surge was cost-push inflation stemming from the geopolitical conflict. The prices of polyester raw materials rose significantly by April 7th compared to February 28th, with MEG up 55% and PTA up 34%, leading to a notable increase in polymerization costs. Polyester manufacturers raised their prices in an attempt to pass on these higher costs. Some producers declared force majeure, with major bottle chip plants being the first to do so. Coupled with optimistic export expectations for polyester bottle chip, this product recorded the highest price increase. However, the price rises for most polyester products were smaller than those for the raw materials. Looking from crude oil down to polyester, the overall increases were greater upstream than downstream, highlighting the inefficiency in cost transmission within the polyester industry chain.

Inventory levels have risen for most polyester products, and polyester operating rates first increased then decreased. From early March to early April, inventory changes across the polyester sector were mixed, with levels rising for most products. Inventory days for polyester filament yarn increased by 3 to 6 days, while inventory for polyester staple fiber rose by approximately 1 day. Polyester bottle chip inventory remained stable at around 10 days, and inventory for polyester chip decreased by 4.7 days. Polyester filament and staple fiber account for about 60% of downstream demand for PTA. The inventory buildup for these fibers was mainly due to weak price-following by terminal enterprises, who resisted high polyester prices and were wary of significant price volatility, leading to subdued purchasing enthusiasm. Polyester bottle chip inventory remained stable because terminal enterprises, primarily large-brand soft drink companies for whom bottle costs represent a low proportion of total product cost, were able to follow price increases more readily and pass on cost pressures. The decrease in polyester chip inventory was attributable to its relatively favorable supply-demand balance and better market conditions for bright chip in March, which prompted terminal enterprises to restock amid rising prices.

Since March, downstream demand has recovered overall but fallen short of market expectations. Both polyester operating rates and loom operating rates saw an initial increase followed by a decline. The main reason is that the geopolitical conflict caused raw material prices to rise too rapidly and with high volatility, making it difficult for polyester plants to pass on costs, leading some to reduce or halt production. The operating rate of terminal looms increased from 5% in late February to 65% in late March, as the market transitioned from the off-season into the peak demand period known as "Golden March, Silver April." The polyester operating rate also rose from 76% during the Spring Festival holiday to 86% by mid-March, indicating a clear recovery in fundamental demand for PTA. However, starting in late March, both loom and polyester operating rates began to gradually decline. From late March to early April, the loom operating rate dropped by approximately 7 percentage points, and the polyester operating rate fell by about 3 percentage points. This decline contradicts typical seasonal patterns, with the loom operating rate being about 13 percentage points below the average for the same period from 2013 to 2025. Market sentiment remains cautious, overall polyester sales are sluggish, instances of high pulse-like sales are limited, and inventory for fiber products like polyester filament and staple fiber has generally increased.

Forecast: With a temporary easing of geopolitical tensions, polyester prices are expected to fall and operating rates to recover. A two-week ceasefire between the US and Iran has led to a roughly 13% intraday drop in Brent crude prices. If the ceasefire holds, international crude prices are expected to continue declining. Lower costs will likely lead to further decreases in the domestic bulk chemical market and lower polymerization costs, prompting polyester producers to reduce their quotations. Once cost pressures ease, polyester operating rates are forecast to recover. However, due to speculative "buy high, sell low" psychology, terminal enterprises may adopt a wait-and-see approach, meaning loom operating rates will likely need time for a slow recovery.

In summary, the geopolitical conflict caused abnormal market movements, disrupting the seasonal patterns of the polyester market. Market sentiment is cautious, with attention focused on the implementation of the ceasefire agreement. A recovery in terminal demand will require time.