The polyester chain is experiencing a rare collective chill. By end-June, routine promotions by polyester plants managed only about 70% of production-to-sales ratio, dropping sharply to near 30% the next day. Compared to previous 'one-day' promotions that easily exceeded 100%, the current market response is at a freezing point. This is not just a slowdown in procurement pace, but a fundamental shift in the game logic between upstream and downstream: when cost support weakens and demand collapses, promotions lose their former appeal.
Cost 'Ceiling' Lowers, Oil Price Expectations Become Key Variable
The biggest variable on the raw material side comes from international crude oil. With the reopening of the Strait of Hormuz and stranded tankers gradually departing, the Middle East energy crisis has been substantially mitigated in the short term. Morgan Stanley has again lowered its oil price forecast within two weeks, believing the market focus has returned to global oversupply, with average Brent crude prices expected at $75 per barrel for both Q3 and Q4. This means the cost 'ceiling' for polyester filament yarn has been clearly lowered, making the 'crazy bull' market of early March—when prices surged by thousands in days—unlikely to reappear. For polyester plants, weaker cost support means less room for price concessions, but also removes the leverage of using rising costs to force downstream restocking.
'Promotion Fatigue' and Profit Game Under High Inventory Pressure
Current inventory pressure at polyester plants has hit multi-year highs: POY, FDY, and DTY inventories stand at 30 days, 35.7 days, and 41.8 days respectively, and are still accumulating. However, plants lack sufficient incentive to cut prices significantly, as high-cost raw material inventories from earlier periods remain unsold, and deep discounts would directly erode profits. This dilemma—reluctant to cut prices but unable to sell without doing so—has led to 'promotion fatigue,' where increased promotional frequency yields diminishing returns.
Downstream weaving mills are displaying extreme rationality: no orders, no production. Profits have been squeezed over the past two years, leaving companies with very limited flexibility, and production elasticity is extremely poor. Price elasticity for fabrics is similarly weak, with breakeven points for inventory and new grey fabrics still under negotiation. This 'low-elasticity' state on both ends has locked the chain in a delicate standoff—no one wants to move first unless a sufficiently strong demand signal emerges.
Low-Inventory Setup: A 'Reservoir' for Price Elasticity in H2
Notably, the cautious inventory strategies across the chain have resulted in relatively low stock levels compared to the past two years. This means that once a breakout demand or seasonal recovery occurs in H2, a supply-demand mismatch could arise in the short term, restoring price elasticity for fabrics. A repeat of last year's 'New Chinese-style' fabric boom is not impossible. In the near term, summer sun-protective clothing was seen as a potential catalyst, but heavy rainfall and delayed high temperatures this year have postponed that demand.