Discount promotions are no longer luring weaving mills. In late June, polyester plants launched another round of aggressive promotions, but the sales-to-output ratio dropped from 70% to 30%, signaling complete 'promotion fatigue' in the market. This is not merely a failure of price cuts; it reflects a more rational phase in the tug-of-war between upstream and downstream players—without orders, no price is low enough to attract buyers.
Weakening Cost Support, Lower Crude Ceiling
International oil prices are returning to a rational range. With the reopening of the Strait of Hormuz, stranded tankers in the Persian Gulf are gradually resuming passage, temporarily easing the energy crisis. Morgan Stanley has revised down its forecast again within two weeks, predicting that Brent crude will average $75 per barrel in Q3 and Q4. This means the 'crazy bull' rally in the polyester chain's cost side has ended. The extreme volatility seen after the Spring Festival—when prices surged 50% within days—is unlikely to recur in the short term.
For polyester plants, lower crude prices ease pressure on polyester filament costs but also invalidate the price-hiking logic. The old model of cost-driven price increases no longer works; factories must face the reality of weak downstream demand.
Demand Collapse: Weaving Mills Wait for Orders
The behavior of downstream weaving mills has fundamentally changed. Profits have been squeezed to the limit over the past two years, leaving companies with little flexibility and extremely low operating-rate elasticity. The market now follows a 'produce only when orders come, stop when they don't' pattern. Fabric price elasticity is also weak, as the breakeven point between inventory greige goods and new orders remains in flux.
Polyester plant inventory data reveals the severity of the supply-demand imbalance:
- POY inventory: 30 days
- FDY inventory: 35.7 days
- DTY inventory: 41.8 days
Inventories are still accumulating. If downstream continues to hold back, polyester filament may face two outcomes: sustained price declines or a more aggressive one-time clearance sale.
Trigger for Recovery: Hit Products and Weather
The entire textile market is waiting for a catalyst. Last year's Spring Festival saw a boom driven by 'New Chinese-style' fabrics. This year's potential hit product is summer sun-protection apparel. Unfortunately, frequent heavy rainfall this summer has delayed the arrival of high temperatures, pushing back demand for sun-protection clothing.
However, the low-inventory environment is a key factor for H2 recovery. Both upstream and downstream players have kept cautious stockpiling, and capacity utilization in H1 has been limited, leaving current fabric inventories at relatively low levels compared to the past two years. Once demand picks up, supply-demand mismatches could occur quickly, restoring fabric price elasticity.
Risk Warning: Payment Security Matters
May and June have been tough for textile businesses. The 'Golden March-April' peak season is long gone, and 'Golden September-October' is still far away. The worse the market, the more speculative behavior emerges. Some companies may take risks. Textile firms must stay vigilant on payment security and avoid relaxing credit controls due to order pressure.