Morgan Stanley has revised its crude oil forecast twice in two weeks, setting the average Brent crude price for Q3 and Q4 2026 at $75 per barrel. For the polyester industry, this signals that the most extreme cost pressures have passed. With the reopening of the Strait of Hormuz, tankers stranded in the Persian Gulf are departing, temporarily easing the energy crisis. Oil is unlikely to repeat the 50% surge seen after the Spring Festival. The lowered cost "ceiling" means that polyester filament price elasticity will depend more on supply-demand dynamics than raw material speculation.
Promotion Fatigue and Inventory Buildup
On June 29, polyester factories launched another round of price promotions, achieving only about 70% of daily sales volume, which quickly dropped to around 30% the next day. Compared to previous promotions that at least exceeded 100% sales, the market signal has qualitatively changed—downstream mills are unwilling to replenish even at low prices. Inventory pressures are mounting: POY stocks stand at 30 days, FDY at 35.7 days, and DTY at 41.8 days, and still accumulating. Factories face a dilemma: high raw material costs limit room for further price cuts, but continued high inventory may force larger-scale clearances.
The Logic Behind Downstream Rationalization
The "minimalist" approach of weaving mills is no accident. Profit margins have been squeezed over the past two years, severely limiting operational flexibility. The industry consensus is clear: no orders, no production. Fabric price elasticity is also weak, with breakeven points for inventory and new orders still being negotiated. This extreme rationality means that even if polyester factories offer deeper discounts, large-scale restocking is unlikely—only genuine end-demand recovery can trigger procurement.
Two Key Variables for H2 Market Recovery
The positive signal is that both upstream and downstream players are cautious in stocking, with limited production capacity utilization in H1, leaving industry-wide inventory relatively low. Once demand clearly recovers, supply-demand mismatches could occur quickly, restoring fabric price elasticity.
- Seasonal products: Summer sun-protective clothing was the most likely hit, but frequent heavy rainfall this year has delayed high temperatures and associated demand.
- Structural hot items: Similar to last year's "New Chinese Style" fabric explosion, a new hot category may emerge in H2. Such demand is unpredictable but can rapidly deplete inventory and boost price elasticity.
Risk Warnings
May and June are traditionally slack seasons for textiles, with the "golden March-April" long gone and "golden September-October" still distant. Weak markets often breed higher risks, including compromised quality or delayed payments. Industry players should prioritize cash flow and payment security. During this rational game period, cash is more valuable than inventory.