After a volatile first half driven by geopolitical oil price spikes, the game between upstream and downstream players in the polyester chain is undergoing a fundamental shift. With the Strait of Hormuz reopened and tankers leaving the Persian Gulf, international oil prices have swiftly retreated from panic highs. Morgan Stanley now forecasts Brent crude averaging $75 per barrel in Q3 and Q4. This means the core cost support for polyester filament yarn, previously inflated by surging crude, is weakening. The chain's cost logic has switched from 'oil-driven' to 'supply-demand driven.'
This shift is vividly reflected in what can be called 'promotion fatigue' at polyester plants. In late June, factories once again cut prices, but the market response was tepid: the daily sales-to-production ratio hovered around 70% on the first day and quickly dropped to 30% the next. This contrasts sharply with previous promotions, where sales easily exceeded production. Downstream weaving mills have become extremely rational, refusing to stock up without confirmed orders. Behind this is a reality of squeezed margins over the past two years, leaving little room for maneuver and near-zero flexibility in restarting looms.
Dual Pressures of High Inventories and Cost Inversion
Polyester plants are now caught in a dilemma. On one hand, they are burdened with high-cost raw material inventories purchased earlier, limiting their room to offer discounts. On the other hand, finished product inventories continue to pile up. Public industry data shows inventory days for POY, FDY, and DTY stand at 30, 35.7, and 41.8 days respectively, with an upward trend. This combination of 'high-cost inventory' and 'slow sales velocity' makes promotions ineffective—too little discount fails to entice buyers, while too deep a cut erodes margins.
For weaving mills, fabric price elasticity is also at a historic low. The breakeven point between stocked grey fabrics and new orders is still being negotiated. The market lacks a blockbuster product to trigger a wave of concentrated purchasing. Last year, the 'New Chinese Style' fabric boom provided a lift, while this year's summer sun-protection fabric was expected to play that role but has been delayed by persistent heavy rains and a late heatwave across China. The entire textile market seems to be waiting for a catalyst.
Conditions and Probability of a H2 Market Upturn
Despite the gloomy mood, a widely overlooked positive signal is that overall industry inventories are relatively low. With limited capacity utilization in H1 and cautious stockpiling across the chain, a demand recovery (e.g., a surge in autumn orders or a new category breakout) could quickly lead to a supply-demand mismatch. This mismatch would directly restore fabric price elasticity and could even trigger a rapid price rally.
Looking at the timeline, the traditional May-June off-season has passed, and the market is transitioning toward the 'Golden September and Silver October' peak. However, the prerequisite for an upturn is not oil prices, but a substantive improvement in end-user orders. If downstream brands and garment factories initiate restocking in H2, combined with current low inventories, the polyester chain could see a healthy price recovery. Conversely, if demand remains weak, polyester filament prices may continue to slide, or force plants into a more aggressive destocking sale.