Geopolitical Risks Intensify: Global Polyester Chain in Turmoil as Prices Surge
Conflict Escalates, War Fears Deepen
The escalating conflict in the Middle East has become the dominant force driving global risk asset prices. The US-Israel-Iran situation has intensified beyond initial expectations, with the US Defense Secretary extending the estimated conflict duration from four weeks to eight weeks or longer. Iran's swift denial of negotiation reports has crushed any remaining market hopes for a quick resolution. As a result, risk aversion has surged, and fears of supply chain disruptions have reached unprecedented levels.
Oil Prices Surge to Multi-Year Highs
With the Strait of Hormuz—the world's energy "valve"—effectively disrupted, global oil markets are feeling the heat. Shipping data confirms a virtual standstill in petroleum logistics through this critical chokepoint. Consequently, oil prices have exploded higher: WTI crude has surged past USD 78 per barrel, up 2.42% on the day, while Brent crude has broken through USD 85 per barrel, both hitting their highest levels since July 2024.
Global Polyester Chain Erupts: Limit-Up Trading and Factory Price Hikes
The surging cost pressure has ignited polyester markets worldwide. In China, the world's largest polyester producer, PX, PTA, and MEG futures all hit the daily limit-up. PET resin bottle grade prices surged as well, approaching limit-up territory. Similar cost-driven pressures are being felt across Asian and European markets, as feedstock prices climb in tandem with crude.
Producer responses have been dramatic:
- Hengli Petrochemical announced an afternoon increase of RMB 1,000 per tonne for polyester chip prices.
- Several major PET bottle grade producers have suspended quoting entirely.
- One producer raised prices four times in a single day, cumulatively up RMB 410 per tonne from the previous day's close.
China Market in Turmoil: A Microcosm of Global Disruption
If futures hitting limit-up represented the macro-level shock, the reaction in China's spot market has been far more visceral. Take semi-dull polyester chips as an example. On March 5, the market witnessed a rare spectacle of multiple price adjustments within a single day—with prices climbing steadily and posting gains of several hundred yuan per tonne by the end of the session. The CCF Price Index recorded a gain of RMB 175 per tonne for the day, the largest single-day increase since the current rally began.
Yet participation has been uneven. Trading volumes surged, but buying was primarily driven by traders and futures-oriented players. Downstream chip processing mills, the actual end-users, largely remained on the sidelines. Some mills with limited or no inventories have chosen to delay production restarts, while others have even temporarily halted operations, preferring to wait rather than chase prices at peak levels. This cautious stance reflects broader uncertainty across global supply chains.
From a cost perspective, chip prices have actually lagged behind the feedstock surge. The processing margin for semi-dull chips plunged by over RMB 180 per tonne from just days earlier, sliding to barely over RMB 100 per tonne and pushing the sector into deep losses—a situation mirrored in polyester markets elsewhere as margins erode worldwide.
Outlook: What Goes Up May Come Down
The relentless rise in feedstock costs is rapidly transmitting downstream across the globe. With the Strait of Hormuz closure extended, global energy supply tensions are expected to persist, and further oil price increases cannot be ruled out. Against this backdrop, the polyester industry worldwide is undergoing a profound cost-push restructuring, with potential for more widespread production cutbacks or additional price hikes.
However, caution is warranted: should geopolitical tensions ease, the sharp gains accumulated could reverse just as quickly—what goes up fast may come down just as fast. All eyes remain on the Strait of Hormuz.
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