Entering the second half of 2026, the game logic of the polyester industry chain is undergoing a fundamental shift. As the geopolitical premium in crude oil prices gradually fades, market attention has returned to fundamentals: cost support is weakening, while downstream demand weakness has become a certainty. The paradox lies in the fact that inventories across the upstream and downstream are at multi-year lows, setting the stage for price elasticity in H2.
Cost Side: Crude Oil 'Ceiling' Moves Downward
The geopolitical risk premium in international oil prices is rapidly dissipating. Following the reopening of the Strait of Hormuz, stranded tankers are gradually departing, temporarily easing energy supply tensions. Morgan Stanley has lowered its oil price forecast again within about two weeks, stating that market focus has returned to global oversupply, with Brent crude expected to average $75 per barrel in both Q3 and Q4.
This means the cost side of polyester raw materials will face significant pressure. The 'crazy bull' market seen in early March, where polyester filament yarn prices surged by thousands of yuan in a single day, is almost impossible to repeat under the lowered oil price ceiling. For polyester factories, the support from raw material costs has weakened considerably, and future price trends will depend more on supply-demand dynamics rather than cost push.
Demand Side: Promotion Fatigue and Inventory Game
Polyester factory promotions are losing their effectiveness. On June 29, factories launched another large-scale promotion, but daily production-sales ratio hovered around 70%, dropping sharply to 30% the next day. This contrasts sharply with previous rounds, which, though often 'one-day wonders,' at least easily exceeded 100%.
Downstream weaving mills have entered an extremely rational procurement mode: no orders, no machine startup, only small replenishments at low prices, with no intention of large-scale stockpiling. Profits have been squeezed too thin over the past two years, leaving companies with little maneuvering room and extremely low operational flexibility. Fabric price elasticity is also weak, with inventory and break-even points for new grey fabrics still in play.
Polyester factory inventory pressure continues to build. POY, FDY, and DTY inventories stand at 30, 35.7, and 41.8 days respectively, and are still rising. Factories lack the incentive to cut prices due to high raw material costs in stock, but the reality is harsh: if downstream continues to hold back, polyester filament may face sustained declines or a more forceful batch sell-off.
Catalyst and Risks for Market Rebound
The entire textile market is waiting for a trigger. Similar to last year's 'New Chinese-style' fabric hit, the most likely candidate currently is summer sun-protective clothing. However, heavy rainfall across China this summer has delayed high temperatures, postponing demand for such garments.
Nevertheless, conditions for a market rebound are maturing. Both upstream and downstream players have been cautious in stocking, with production capacity utilization limited in H1. Current market inventories are at relatively low levels compared to the past two years. Once demand recovers, it could trigger a short-term supply-demand mismatch, restoring fabric price elasticity.
On the other hand, May and June were tough for the textile industry. The 'golden March and April' are long gone, and 'golden September and October' are still far away. The worse the market, the higher the risks, with some companies possibly resorting to unscrupulous practices. Textile companies must stay vigilant, especially regarding payment collection safety.