Due to the conflict in the Middle East, international crude oil prices have surged sharply, with the impact spreading to multiple industrial chains, including the textile industry.

The primary products directly affected are petroleum-based synthetic fibers, such as the commonly used polyester.

Taking “polyester POY”—a major product category within polyester fibers—as an example, data shows that prices for this product began to rise gradually starting in late January, surpassing RMB7,000 per ton. Prices surged sharply in March, reaching as high as RMB 9,600 per ton on March 10. As of March 17, prices remained at a high level of RMB 9,325 per ton.

According to several fabric suppliers dealing in polyester fabrics, they have already felt the pressure from upstream price increases. However, regarding whether to raise prices for downstream customers and by how much—with polyester products recently seeing increases of up to 15%—they generally maintain a cautious, wait-and-see attitude.

According to data from market research firm Global Growth Insights, synthetic fibers account for nearly 62% of global fiber consumption, and polyester is commonly used in outdoor sports apparel known for its functionality.

Information from several downstream garment factories and brands indicates that while some factories have felt a slight impact from the current volatility in raw material prices, the overall effect remains minimal and has not yet been passed on to the brand side. Supply chains remain stable for several brands specializing in functional apparel.

It is worth noting that some non-synthetic fibers can serve as substitutes for synthetic fibers, such as viscose staple fiber and polyester staple fiber. Therefore, in theory, when polyester prices rise to a certain level, downstream enterprises may shift to purchasing more viscose, leading to an indirect price increase for viscose due to the substitution effect.

Data shows that the quoted price for polyester staple fiber rose from over 6,000 yuan per ton in February to 8,040 yuan per ton by March 17; although viscose staple fiber prices have also risen slightly since March, there remains a gap between the two, with the latest quoted price at 13,030 yuan per ton.

It is foreseeable that if raw material prices remain high or continue to rise in the future, costs will inevitably be passed down the supply chain to downstream sectors. The extent of the impact on each segment will depend on the profit margins available to absorb the cost pressures resulting from price increases.

Taking domestic listed companies as a reference, the gross profit margins of Tongkun Co., Ltd. and Xin Fengming—the two leading enterprises in the polyester filament industry—have hovered around 5% over the past two to three years. In the fabric production segment, Caidie Industrial’s polyester fabric business boasts a gross margin exceeding 30%, while Taihua New Materials, which produces nylon fabrics, also maintains a gross margin of around 30% for its finished fabric business. Well-known contract manufacturers in the apparel sector, such as Shenzhou International, Jingyuan International, and Virginie, generally have gross margins ranging from 15% to 30%.

The lion’s share of profits across the entire supply chain is captured by the brand owners. In the apparel industry, pricing conventions dictate that fast-fashion brands targeting the mass market generally have gross profit margins of over 40%, while mid-to-high-end brands typically range from 50% to 70%. Brands commanding even higher premiums, such as luxury brands, may exceed 70%.

However, compared to upstream enterprises in the supply chain, brand owners also bear higher sales costs, so their net profit margins are not necessarily higher than those of upstream companies.

As an integrated internet platform providing benchmark prices, on March 19, the benchmark price for polyester POY on Sunsirs stood at 9,325.00 RMB/ton, representing an increase of 29.74% compared to the beginning of the month (7,187.50 RMB/ton).

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