The US-Iran conflict is disturbing crude oil, the PTA market swings with costs, and end-user shortages still remain.

Recently, the geopolitical conflict between the U.S. and Iran in the Middle East has continued to escalate, causing disturbances in the international crude oil market due to geopolitical risk premiums. This has led to significant price volatility, directly transmitting to the upstream of the chemical industry chain. Domestic PTA futures have experienced a high-level, wide-range oscillating trend, with prices fluctuating dramatically in line with crude oil, while the contradictions in the supply and demand fundamentals are gradually emerging.

Looking back at the recent market trend, last week, geopolitical tension boosted crude oil valuations, driving crude oil prices to consecutive highs. The rising costs provided strong upward traction for PTA, leading the PTA futures market to strengthen correspondingly. However, the cost increase did not smoothly transmit to the downstream spot market. As PTA production units that had been shut down for maintenance gradually restarted, the overall industry production load steadily recovered. Market supply gradually increased, suppressing the extent of spot market price follow-up, continuously squeezing PTA processing fees and narrowing the profit margins of producers. Entering Monday this week, bullish sentiment in crude oil subsided, and oil prices swiftly fell from high levels. Cost support loosened rapidly, and PTA futures subsequently exhibited a high-open, low-close trend, almost erasing all the gains accumulated in last Friday’s night session. This fully reflects the current PTA market’s high dependence on crude oil, with insufficient support from its own fundamentals.

From the perspective of downstream demand, the temporary price concession of upstream raw materials has allowed polyester enterprises to restore part of their production profits, stimulating their willingness to resume production. Last week, the operating rate of the domestic polyester industry increased by 1.9 percentage points week-on-week, reaching 76.2%, marking a round of operational recovery. However, compared with the historical operating range of 84%-93% during the same period from 2022 to 2025, the current polyester operating level is still significantly lower than the seasonal level of previous years, and the overall gap in demand remains objectively present.

What is more alarming is that the benefits from the increased output of polyester plants have not translated to the textile end-market. Data shows that last week, the loom operating rate in Jiangsu and Zhejiang decreased from 53% to 52%, and the operating rate of the texturing machines also fell from 64% to 61%, indicating that the terminal weaving sector has declined rather than risen. Facing market uncertainty, weaving enterprises generally adhere to a conservative operational strategy of producing based on sales and purchasing as needed, and have not actively replenished inventory or expanded production in response to the rebound in polyester operations. This implies that this round of increase in polyester operating rates is largely a passive profit restoration driven by the decline in raw material costs, rather than active production expansion driven by a recovery in downstream textile orders. Therefore, the actual marginal driving effect on PTA raw materials is relatively limited, and the endogenous growth momentum of demand is insufficient.

From the perspective of inventory, the current absolute inventory levels of PTA in both the market and factories are not particularly high. Low inventory levels can provide some underlying support for market prices and limit the space for deep price declines, but relying solely on the inventory advantage is insufficient to reverse the current trend of weakening supply and demand. Entering the fourth quarter, the textile industry steps into the traditional low season for consumption, with end-market textile export and domestic orders unlikely to exceed expectations. The practical potential for large-scale restocking in the downstream supply chain is very limited. If the operating rates of weaving machines and texturing machines continue to decline and end consumption remains weak, it will be difficult to maintain the current trend of increasing polyester factory operations, and a further reduction in load is highly likely.

Overall, crude oil costs remain the key factor affecting the short-term PTA market. Every change in geopolitical situations leads to significant fluctuations in oil prices, which in turn causes repeated movements in PTA prices. However, the medium- to long-term market cannot escape the fundamental reality of supply and demand: without substantial improvement in end-market textile demand, PTA lacks stable and sustained demand growth, making it difficult to reverse expectations of phased inventory accumulation. In the subsequent market development, PTA may continue to maintain a high-level oscillating pattern, with upward potential limited by weak end demand, while support on the downside depends on existing inventory levels and crude oil costs. A turning point in the market would require clear signs of recovery in end weaving orders or large-scale production curtailment on the supply side.