International oil prices are expected to fall back to the $75 range, coupled with the short-term easing of Middle East supply risks, the polyester industry chain is undergoing a 'debubbling' cost regression. However, the response from the downstream weaving market has been surprisingly cold—promotions no longer work, and restocking willingness has hit rock bottom. The industry seems to have entered an awkward phase of 'high inventory, low elasticity,' with a real market rebound unlikely until the second half of the year.
Promotion Fatigue: Downstream Rationality at Its Peak
On June 29, polyester factories launched another large-scale promotion, but the production-to-sales ratio hovered around 70% that day and plummeted to 30% the next. Compared with previous promotions that easily exceeded 100%, the market has clearly entered a state of 'promotion fatigue.' Downstream weaving mills are not without demand; they have chosen extreme caution: no orders, no production. Margins have been squeezed over the past two years, leaving companies with almost no room to maneuver and extremely poor production elasticity. The fabric market also lacks price flexibility, as the breakeven point between inventory fabrics and new grey fabrics is still under negotiation, and mills are unwilling to buy into low-price promotions.
Cost Ceiling Lowers
Support from raw material costs is weakening. After the lifting of the blockade in the Strait of Hormuz, oil tankers stranded in the Persian Gulf are gradually departing, temporarily alleviating the energy crisis. Morgan Stanley has downgraded its oil price forecast again within two weeks, believing the market focus has returned to global oversupply, with Brent crude averaging $75 per barrel in Q3 and Q4. This means the cost pressure on polyester filament yarn has eased significantly, making it unlikely to see the 'bull run' of thousands of yuan per ton increases seen in early March. With the oil price ceiling lowered, polyester factories are losing confidence in price support, but they still lack the incentive to cut prices due to high raw material inventory costs—price cuts would mean losses.
Inventory Divergence: High Upstream, Low Downstream
The inventory pressure on polyester factories is not to be ignored: POY, FDY, and DTY inventories stand at 30, 35.7, and 41.8 days respectively, and are still accumulating. If downstream demand fails to pick up, polyester filament yarn may continue to decline slowly or trigger a more aggressive sell-off. Interestingly, the entire textile chain is cautious about restocking, with limited capacity utilization in the first half of the year. Fabric and grey fabric inventories are relatively low compared to the past two years. This mismatch—high upstream inventory and low downstream inventory—could, once demand recovers, quickly lead to supply-demand imbalances and restore fabric price elasticity.
Market Awaits a 'Blockbuster'
The entire textile market is waiting for a demand catalyst, which could be a blockbuster fabric like the 'New Chinese Style' seen last Spring Festival. In the short term, summer sun-protective clothing is considered the most likely spark, but frequent heavy rainfall in China this summer has delayed high temperatures and thus the demand for sun-protective clothing. The real market rebound may not come until the second half of the year. Textile players had a tough May and June, with the 'Golden March and Silver April' long gone and 'Golden September and Silver October' still far away, while market risks are rising.