As oil tankers resume passage through the Strait of Hormuz, the geopolitical premium on crude is rapidly evaporating. Morgan Stanley has twice lowered its oil price forecast within two weeks, now projecting Brent crude to average $75 per barrel in both Q3 and Q4. This means the most violent source of upstream cost volatility for the polyester chain has been removed, making it unlikely for polyester filament yarn to repeat the extreme price surges seen earlier this year.
High Inventory and Promotion Fatigue
On June 29, polyester plants launched another round of major promotions, but same-day sales only reached around 70% of capacity, plunging to roughly 30% the following day. This contrasts sharply with previous promotional rounds, where sales easily exceeded 100% even if only for a single day. Weaving mills' purchasing willingness has hit rock bottom, with only minimal replenishment at low prices and a complete abandonment of large-scale stocking.
Inventory pressure at polyester plants is accelerating. Industry data shows that POY, FDY, and DTY inventory days have reached 30, 35.7, and 41.8 days respectively, and are still rising. High inventories and low sales form a negative feedback loop: factories cut prices to move goods, downstream buyers remain unmoved, and inventories continue to pile up.
The essence of this 'promotion fatigue' is a rational defense by downstream players whose margins have been squeezed to the limit. Over the past two years, weaving margins have been consistently compressed, dramatically reducing companies' financial flexibility. No orders means no production—this has become the industry's survival mantra. Fabric price elasticity is extremely poor, and the breakeven point between old inventory and new production remains fiercely contested.
Latent Flexibility in Low Inventory Structure
Despite widespread pessimism, a positive signal often overlooked is brewing. Due to extremely cautious stocking strategies across the entire supply chain in H1, the industry's inventory levels are significantly lower than in the past two years.
May and June are traditionally the off-season, with orders already scarce. But low inventories mean that if demand shows marginal improvement in H2, the market could face a sudden supply-demand mismatch—at which point fabric price flexibility would quickly return. The impulsive price rally triggered by 'New Chinese Style' fabrics after last year's Spring Festival was essentially a revaluation event caused by low inventories meeting an unexpected hit product.
The most likely catalyst currently is summer sun-protective clothing. However, persistent heavy rainfall across China this year has delayed high temperatures, pushing back demand for sun-protective fabrics. Once weather conditions improve, this pent-up demand could be released in a concentrated wave.
A New Phase in Upstream-Downstream Game
With the crude cost 'ceiling' lowered, polyester plants ironically have less room to offer discounts. Their high-cost raw material inventories from earlier purchases create cost rigidity. If downstream continues to resist buying, polyester yarn may enter a gradual decline channel, or trigger a more forceful round of destocking.
For weaving mills, the core strategy now is managing cash flow and inventory positions. Maintaining low operating rates and low raw material inventories remains rational until demand clearly recovers. But there is also a risk of over-pessimism—if a hit product category or concentrated restocking wave occurs in H2, mills without raw material reserves could miss the window.
A cautionary note: the worse the market, the higher the risk. Some companies may cut corners by lowering quality or delaying payments. Receivables safety has become a critical operational concern.