The polyester chain is experiencing an unusual 'promotion fatigue.' On June 29, polyester factories launched massive discounts, but sales rates hovered around 70% that day and plummeted to 30% the next. Unlike past promotions that easily drove sales above 100%, downstream weaving mills are now largely indifferent, only making sporadic replenishments. This reflects a deep rationalization of upstream-downstream negotiations, with the market awaiting new catalysts to break the deadlock.
Cost Side: Oil Price Ceiling Lowers, Polyester Cost Support Weakens
The geopolitical premium on international crude is fading. With the reopening of the Strait of Hormuz and stranded tankers resuming transit, the energy crisis has eased in the short term. Morgan Stanley has again cut its oil price forecast within two weeks, shifting focus to global oversupply, predicting Brent crude at $75 per barrel for Q3 and Q4. This means polyester filament yarn costs are unlikely to repeat the sharp surges of early March. For polyester mills, raw material cost pressure has eased, but digesting high-priced inventory remains a challenge, limiting room for further price concessions.
Inventory Side: Three Major Products Accumulate, Destocking Pressure Rises
Industry data shows that as of late June, inventory days for POY, FDY, and DTY reached 30, 35.7, and 41.8 days respectively, with continued accumulation. These levels far exceed the healthy range of 15-20 days. High inventories combined with low sales create a dilemma for polyester mills: lowering prices erodes already thin margins, while maintaining prices worsens the inventory burden. It is possible that mills will launch more aggressive clearance sales in the coming weeks, but success depends on actual downstream demand.
Demand Side: Weavers 'No Orders, No Production,' Price Elasticity Suppressed
Downstream weaving mills have fundamentally changed their behavior. After two years of squeezed profits, their operational flexibility is sharply limited, making them extremely cautious. The prevailing rule is 'no orders, no production.' Fabric price elasticity is also weak, with breakeven points between inventory and fresh gray fabrics still under negotiation. This caution is evident in the summer sun-protection fabric segment: heavy rainfall this year has delayed high temperatures, pushing back demand for sun-protective clothing and closing a potential short-term boom.
H2 Outlook: Low Inventory May Trigger Supply-Demand Mismatch
Despite the current gloom, structural opportunities are brewing. Because upstream and downstream players have been cautious in stocking and capacity utilization in H1, overall inventory levels are lower than in the past two years. Once demand recovers—whether from the traditional peak season in Q4 or a blockbuster product like last year's 'New Chinese-style' fabric—a short-term supply-demand mismatch could restore fabric price elasticity. This elasticity will be the key variable for profit recovery in the second half.
Risk Alert: Tougher Market Demands Vigilance on Payment Security
Textile players had a tough May and June. With the 'golden March-April' peak long gone and the 'golden September-October' still distant, some enterprises may resort to irregular practices. Industry participants must stay alert to payment risks to avoid defaults.