Polyester industrial yarn: downward prices and squeezing processing spread

Over the past month or so, the prices of polyester industrial yarn has been under downward correction amid repeated discount promotions. At present, the mainstream transaction price of ordinary high-tenacity 1000D PIY stands at around 11,100yuan/mt, a drop of 1,100yuan/mt or roughly 9% compared with early-May.

The decline in PIY prices stems from two factors: falling costs on the raw material side and manufacturers cutting margins to boost sales. In May, costs of polyester feedstocks and PET fiber chip prices slid gradually, pulling PIY prices down moderately, while processing spread fluctuated at a high level. Despite relatively robust processing spread for PIY, downstream buyers widely reported sluggish demand and weak orders, weighing on processing spread. Market sentiment turned bearish, with purchasing interest muted; buyers only restocked modestly during promotional offers and relied mostly on inventory drawdowns at other times. Entering June, even though the price of polyester feedstocks and PET fiber chips rebounded slightly, PIY prices kept falling as manufacturers offered further discounts to clear stock. Given that processing spread for PIY remains fairly healthy at present, sustained unsold high-priced inventory would prevent manufacturers from realizing actual earnings. Hence, prioritizing order intake via moderate price cuts and converting sales into cash profits is the prevailing strategy. According to data from CCFGroup, the processing spread for chip-spun ordinary high-tenacity PIY1000D reached 3,650yuan/mt now. While this represents a sharp contraction of over 700yuan/mt from the peak in early-May, it remains markedly above levels seen at the start of the year, delivering solid spot cash flow profits.

As for the outlook, PIY prices may hold steady if upstream costs remain firm; if feedstock costs trend softly amid stability, PIY prices are projected to slide further, supported by the still comfortable processing spread available now. On the upstream front, geopolitical tensions in the Middle East remain volatile, with fresh clashes erupting between Israel and Iran recently. Rising crude oil prices have lifted polyester feedstock costs for yesterday, but the trajectory ahead, whether conflicts escalate, tensions ease, or a US-Iran peace deal materializes, remains uncertain. A de-escalation scenario is deemed more probable, meaning downstream purchasing is likely to stay cautious going forward. Some speculative restocking may emerge, but large-scale inventory building is not expected.