A Zhejiang-based polyester filament factory with an annual capacity of 100,000 tons has seen its raw material cost ratio drop from 72% over the past three years to a lower level since Q2 this year.
The key variable comes from the Persian Gulf. After the UAE formally exited OPEC, it ramped up production to its full capacity of 4.85 million barrels per day and proactively lowered export prices. International oil prices have since oscillated downward, triggering a rapid response in China's polyester supply chain: prices of polyester filament, staple fiber, and PET chips have fallen consecutively.
Cost Transmission: A Three-Layer Price Reduction Logic from Crude to Yarn
The first layer is crude directly lowering naphtha and PX prices. The UAE's crude production cost is far lower than most oil-producing countries. Freed from OPEC quota constraints, its 'low-price, high-volume' strategy continues to suppress international oil prices. A recent Goldman Sachs report shows global oil inventories nearing an eight-year low, but the UAE's incremental supply is filling the gap and capping price rebounds.
The second layer is the collapse in the PX-PTA chain. PX prices follow crude downward, compressing PTA processing margins. Domestic PTA plant operating rates remain high, but spot transaction prices have fallen 8%-12% from Q1 levels, shifting polyester mills' purchasing stance from wait-and-see to active restocking.
The third layer directly benefits polyester filament and staple fiber. Lower raw material costs, combined with rising restocking willingness from downstream weaving mills, have accelerated inventory turnover. For weaving, home textile, and garment processing companies, this means reduced inventory devaluation risk and reopened product pricing space.
African Market Shift: Hidden Dividends for China's Textile Trade
The UAE's low-cost crude flooding into Africa is disrupting local energy supply-demand balances. Most African oil-producing countries lag in refining technology and face high extraction costs, keeping local chemical fiber raw material prices above international levels. The influx of UAE's cheap crude has squeezed the export space of African crude, shrinking local oil and gas companies' profits and underutilizing refining capacity.
This creates a structural opportunity for Chinese textile companies. Africa is a key export destination for Chinese fabrics, home textiles, and garments. As Africa's local raw material supply chain is disrupted, Chinese chemical fiber and fabric products, with their cost-performance advantage, can fill the supply gap. China's textile exports to Africa grew about 11% year-on-year from January to April 2025, and this growth rate may accelerate under the UAE crude impact.
Peak Season Outlook: How Long Can the Profit Recovery Window Last?
July to October is the traditional peak season for textiles, when domestic and foreign orders are released intensively. Lower raw material costs combined with recovering demand could lift gross margins to a five-year high. However, two risk points need watching:
- The pace of UAE capacity release. It plans to exceed 5 million bpd by 2027, with a medium-term target of 6 million bpd. If production ramps up too fast, oil prices may overshoot, causing sharp volatility in chemical prices.
- The strength of downstream demand recovery. Global apparel consumption remains constrained by inflation and destocking. Whether order volume growth can digest the profit space from raw material price declines remains uncertain.