The international oil price is expected to fall back to $75/barrel, coupled with the reopening of the Strait of Hormuz, the cost-side support of the polyester industry chain is undergoing structural loosening. But this is not a simple story of 'costs down, profits up'—the divergence in upstream and downstream inventory structures is dragging the market into a more complex game.
Cost 'Ceiling' Meets Inventory 'Dam'
Morgan Stanley has twice lowered its oil price forecast within two weeks, predicting average Brent crude prices of $75/barrel for both Q3 and Q4. This assessment is based on the reopening of the Strait of Hormuz, which allowed stranded tankers to resume transit, temporarily easing the energy crisis. The lower oil 'ceiling' means that the cost of polyester filament yarn is unlikely to see the extreme daily spikes of thousands of yuan seen in early March.
However, polyester mills are not immediately feeling the benefit of lower costs. Their raw material inventory costs remain high, limiting their incentive to cut prices, even as finished product inventories continue to climb. As of late June, POY, FDY, and DTY inventory days stood at 30, 35.7, and 41.8 days respectively, and are still accumulating. This is a classic 'dam' situation—high upstream inventory with almost no downstream uptake.
Downstream 'Rationality' to the Extreme: Promotion Fatigue and Low Inventories
On June 29, polyester mills launched a new round of promotions, but the production-to-sales ratio was only about 70%; the next day it plummeted to 30%. Compared to previous promotions that easily exceeded 100% (even if only for a day), the market has fallen into obvious 'promotion fatigue'. Weaving mills have become extremely rational: no orders mean no machine starts; they only make small replenishments at low prices, avoiding large-scale stockpiling.
This rationality is a natural reaction after two years of severely compressed margins. Weaving mills have little room for maneuver, and machine start-up flexibility is extremely poor. Meanwhile, price elasticity in the grey fabric market is also weak—breakeven points between inventory fabrics and new orders are still being negotiated, and insufficient end-order demand has paralyzed the price transmission mechanism.
But notably, precisely because downstream stockpiling is so cautious, the 'hidden inventory' across the textile chain is at a relatively low level. First-half capacity utilization was not high. If market demand recovers, supply-demand mismatches could erupt in a short time, restoring price elasticity to fabrics.
Waiting for a 'Blockbuster': Can Sun-Protection Clothing Be the Catalyst?
The market is broadly waiting for a 'blockbuster' product to break the deadlock, similar to the 'New Chinese Style' fabric trend last Chinese New Year. In the short term, summer sun-protection clothing is the most promising candidate. But this year, heavy rainfall has been frequent in China, delaying the arrival of high temperatures and postponing demand for sun-protection fabrics. If temperatures spike in mid-to-late July, orders for sun-protection fabrics may be released intensively, driving weaving mills to replenish and thus unlocking the entire polyester chain's inventory digestion.
Looking at the longer cycle, the 'Golden September and Silver October' period is the real demand validation window. But before that, textile players had a tough May-June: the worse the market, the higher the risks, and some companies may resort to unconventional measures. Payment security requires high vigilance.