Oil Price Surge Drives Polyester Costs Higher for China’s Textile & Apparel Industry in H2 2026
Date: July 21, 2026
China’s textile and apparel export recovery in the first half of 2026 is facing new headwinds as a sharp surge in international oil prices drives up polyester raw material costs, squeezing margins across the supply chain. Brent crude briefly broke above $76/barrel in early July amid heightened Middle East tensions, triggering a rapid pass-through to polyester filament prices.
Key Highlights:
- Cost Surge: Brent crude peaked at $76.01/barrel in early July following Hormuz Strait shipping disruptions and renewed Iran sanctions, far exceeding earlier institutional forecasts. The price spike triggered a complete pass-through chain from crude to PTA to polyester filament.
- Polyester Price Rally: PTA prices surged 25.78% year-on-year to RMB 6,024.5/ton on July 14, with a single-day gain of 2.14%. Polyester POY rose 17.64% YoY to RMB 8,168.75/ton, and DTY increased 13.90% YoY to RMB 9,218.75/ton, pushing upstream costs to multi-year highs.
- Supply Discipline: Leading polyester producers maintained a 35% capacity reduction through July, shifting from passive price-taking to active price-support strategies. With industry inventory at multi-year lows, the market has entered a phase focused on protecting processing margins.
- Downstream Pressure: Greige fabric inventory climbed to 31.68 days as of early July, reflecting cautious ordering from downstream weaving mills. Jiangsu-Zhejiang weaving operating rates stood at approximately 59%, signaling subdued demand amid rising raw material costs.
Cost-Export Divergence Reshapes H2 Outlook:
China’s textile and apparel exports reached $145.96 billion in H1 2026, up 1.4% year-on-year, with June alone contributing $29.27 billion (+7.2% YoY, +14.3% MoM) driven by pent-up order releases after the May US-China tariff detente and early autumn-winter procurement. However, the oil-driven polyester cost escalation threatens to erode the margin gains from stronger export volumes.
The structural divergence tells a nuanced story: textile exports (yarn, fabric, raw materials) grew 3.5% YoY to $73.0 billion in H1, while garment exports slipped 0.7% to $72.96 billion. The polyester-intensive garment segment is now doubly squeezed, facing both rising input costs and price competition from alternative sourcing destinations.
Looking ahead to H2 2026, the industry faces a three-variable tug-of-war: autumn-winter seasonal demand (traditionally accounting for over 60% of annual polyester filament consumption), oil price trajectory tied to Middle East geopolitical developments, and the pass-through capacity of manufacturers to pass higher costs to buyers. PTA capacity expansion is minimal through 2028, suggesting the tight supply equilibrium may persist beyond the current cycle.
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