The ceiling for crude oil is lowering. Morgan Stanley cut its oil price forecast for the second time in about two weeks, setting Q3 and Q4 Brent crude averages at $75 per barrel. This suggests that the cost surge pressure on the polyester chain from Middle East tensions will ease significantly, making it unlikely for polyester filament yarn to repeat the 'crazy bull' rally of early March.
Rational Game: Promotion Fatigue and Inventory Divergence
The easing on the cost side hasn't immediately transmitted downstream. On June 29, polyester factories launched another round of major promotions, but daily sales-to-production ratio hovered around 70%, sliding to near 30% the next day. Downstream weaving mills only made small replenishments at lows, showing no appetite for bulk stocking. The market has fallen into classic promotion fatigue—factories offer discounts, but mills barely respond.
Inventory data reveals the deep contradiction. Public industry data shows POY, FDY, and DTY inventories at 30, 35.7, and 41.8 days respectively, still accumulating. Polyester factories lack motivation to cut prices further due to high raw material costs, but reality is harsh: if downstream continues to hold back, polyester yarn may face persistent declines or one sharp sell-off.
Downstream weavers have swung to the other extreme. Margins have been squeezed over the past two years, leaving little room for maneuver. Fabric price elasticity is poor, and the breakeven point between old stocks and fresh grey goods remains in play. The consensus is: no orders, no production.
H2 Outlook: Low Inventories May Create Price Elasticity
Despite prevailing pessimism, H2 holds potential turning points. Both upstream and downstream are now cautious in stocking; production capacity in H1 was limited. Current inventories are relatively low compared to the past two years. If demand picks up, a short-term supply-demand mismatch could restore price elasticity in fabrics.
In the near term, summer sun-protective garments are the most likely hot product. But heavy rainfall across China this summer has delayed the heatwave, pushing back demand for such items. Looking back at the 'New Chinese Style' fabrics from last Spring Festival, a single blockbuster product can instantly activate the entire chain.
Risk Warnings and Practical Advice
May and June were tough for textile players. The 'golden March-April' season is long gone, and 'golden September-October' remains distant. The worse the market, the higher the risks—some may resort to shady practices. Stay vigilant and monitor payment safety closely.