Polyester Market Falls into 'Promotion Fatigue', Low Inventories Could Ignite Price Elasticity in H2

The 'golden March-April' peak season for the polyester market has passed, and the 'golden September-October' is still far away. Entering the second half of the year, the industry is experiencing a rare 'promotion fatigue'. At the end of June, polyester factories launched major promotions, but sales only hovered around 70% of capacity, plummeting to 30% the next day. Compared to previous promotions that easily exceeded 100%, the current market reaction is remarkably cold. Behind this lies a profound shift in the upstream-downstream game and the calm before a new cycle.

Cost Ceiling Lowers

Support from the raw material side is weakening significantly. Although the Middle East situation is not fully resolved, the blockade of the Strait of Hormuz has been lifted, and oil tankers stranded in the Persian Gulf are gradually departing, temporarily alleviating the energy crisis. International oil prices are unlikely to repeat the extreme surge of 50% in a few days seen after the Spring Festival. Morgan Stanley has once again lowered its oil price forecast within about two weeks, shifting focus back to global oversupply, with average spot Brent crude oil prices expected at $75 per barrel for Q3 and Q4. The lower oil price ceiling means reduced cost pressure for polyester filament yarn, making it difficult to see the crazy bull market of early March. This directly weakens the pricing power of polyester factories and provides more room for downstream mills to wait and see.

Downstream 'Extreme Rationality' and Inventory Accumulation

The collapse in demand is the core of current market weakness. Downstream weaving enterprises have become extremely rational—without orders, they resolutely refuse to start machines. Profits have been squeezed too thin over the past two years, severely limiting operational flexibility. Price elasticity for fabrics is also poor, as the breakeven point between inventory and new grey fabrics remains in contention. Polyester factories lack the motivation to offer further discounts due to high raw material inventory costs, but reality is harsh: POY, FDY, and DTY inventories stand at 30, 35.7, and 41.8 days respectively, and are still accumulating. If downstream continues to hold back, polyester yarn may see sustained price declines or a more aggressive clearance sale. This 'promotion fatigue' essentially reflects a complete reevaluation of price expectations by downstream players.

Potential Elasticity from Low Inventories

Despite high upstream inventories, overall social inventories in the textile market remain relatively low. Due to cautious stocking across the chain and limited capacity utilization in H1, current market inventories are lower than in the past two years. This means that once demand picks up, a short-term supply-demand mismatch could occur, restoring price elasticity for fabrics. This elasticity is the most noteworthy variable for H2. In the short term, the most likely demand catalyst is summer sun-protective clothing, but unfortunately, frequent heavy rainfall this summer has delayed the heatwave and thus postponed demand for such apparel. Historical experience shows that hit products like the 'New Chinese Style' fabric last Spring Festival can break the supply-demand balance.

Practical Recommendations

For Buyers - Given weak promotion effects, watch for potential 'clearance sales' from polyester factories and replenish moderately at lower prices. - Closely monitor weather changes and signals from potential hit fabrics like sun-protective or New Chinese Style, securing supply early. - Maintain a low-inventory strategy and avoid overstocking when costs are clearly trending down.

For Foreign Trade Enterprises - Be wary of market risks, focus on payment security, and avoid expanding credit sales during sluggish periods. - Take advantage of current low raw material costs to lock in forward prices when accepting orders, hedging against potential price rebounds in H2. - Monitor developments in the Strait of Hormuz and international oil prices, planning procurement schedules to mitigate energy volatility.