Polyester industrial yarns: widening structural divergence

On Tuesday last week, amid sharp hikes in polyester feedstock and PET fiber chip prices, polyester industrial yarn suppliers offered one-day promotional discounts, which drove a notable surge in trading volume. Prices were then lifted by 300yuan/mt on last Wednesday, and transactions turned subdued.

Current profit performance of conventional high-tenacity and low-shrinkage grades

For conventional high-tenacity yarn: Virtually no new capacity has been added over the past three years, and producers have consistently implemented output curtailment to support prices. As a result, processing spread has trended upward on balance, running far above levels seen in previous years. Low-shrinkage yarn features a supply-demand profile similar to high-tenacity grades, with no capacity additions in the past three years. Its spot price was generally 300-600yuan/mt higher than conventional high-tenacity yarn (3-month acceptance basis). Its processing spread trajectory mirrors that of high-tenacity yarn, and it has also delivered healthy spot cash-flow profit this year.

Supply-demand shift and margin compression for HMLS industrial yarn

High-modulus low-shrinkage (HMLS) polyester industrial yarn presents a contrasting picture. All new PIY capacity commissioned over the past three years belongs to the HMLS segment: 40kt from Junma in 2024; 6kt from Taiji in 2025; 20kt from Junma and 25kt from Polytex in H1 2026. An additional 80kt of new capacity from Haiyang Technology is being phased-in in H2 2026.

All these new capacity HMLS producers operate downstream supporting polyester tire-cord-fabric lines, and several have expanded their tire-cord-fabric capacity in recent years. Except Haiyang Technology, which previously had no in-house industrial yarn capacity, the rest already possessed partial captive industrial yarn capacity. These manufacturers have shifted from partial external procurement of HMLS yarn toward self-sufficiency; some even sell surplus volumes into the open market.

This shift has transformed the HMLS segment from a supply-short market with far fatter margin than conventional high-tenacity yarn, into a supply-surplus market. Over the past twelve months, HMLS profitability has fallen below that of conventional high-tenacity yarn.

Production costs for HMLS industrial yarn are roughly 500-1000yuan/mt higher than conventional high-tenacity yarn. Since July, the price spread between the two grades has kept narrowing, and current market transaction prices are nearly flat. While conventional high-tenacity yarn continues to enjoy robust profits, HMLS margins have been squeezed steadily and now sit only marginally above breakeven.

Market outlook: persistent structural divergence

Looking ahead, the gradual ramp-up of Haiyang's new capacity plus the restart of Guxiandao's plant may further weaken HMLS supply-demand fundamentals. Its processing spread could at times dip slightly below the cost line. By contrast, conventional high-tenacity and low-shrinkage industrial yarns are expected to maintain high-range fluctuating processing margins for the rest of the year, and structural divergence within the industrial yarn sector will remain prominent.