Polyester Chain Faces 'Promotion Fatigue,' Low Inventories Could Trigger Price Rebound in H2

The polyester chain is entering a delicate game of brinkmanship. On June 29, polyester factories launched a new round of price cuts, but the market response was tepid: the daily sales-to-output ratio hovered around 70%, only to plummet to about 30% the next day. Promotions failed to move inventory, and downstream buying interest hit a low, with only small restocking at low prices and no sign of bulk procurement. This 'promotion fatigue' signals that traditional discount strategies can no longer spur demand, and the logic of upstream-downstream bargaining is fundamentally shifting.

Cost Side: Crude Oil 'Ceiling' Lowers, Polyester Raw Material Support Weakens

The driving force from the cost side is fading. With the reopening of the Strait of Hormuz, tankers stranded in the Persian Gulf are gradually departing, easing the energy crisis premium triggered by geopolitical events in the short term. Morgan Stanley has again lowered its oil price forecast within about two weeks, stating that market attention has returned to global oversupply, with spot Brent crude averaging $75 per barrel in both Q3 and Q4. This means the cost pressure on polyester filament yarn has sharply decreased. The 'crazy bull' market of crude oil surging 50% in a few days after the Spring Festival is unlikely to recur. For polyester plants, the 'safety cushion' from raw materials has thinned, making it difficult to support product prices through cost pass-through. Polyester factories currently lack the incentive to cut prices further, as their raw material inventory costs are high. However, the reality is stark: POY, FDY, and DTY inventories stand at 30 days, 35.7 days, and 41.8 days, respectively, and are still accumulating. If downstream remains unresponsive, polyester yarn prices may continue to drift lower, or a more aggressive inventory clearance could occur.

Demand Side: Weaving Mills 'Extremely Rational,' Operating Flexibility Minimal

The 'collapse' on the demand side is the root cause of the market deadlock. Downstream weaving mills have become extremely rational—they refuse to run machines without confirmed orders. Profits have been squeezed too thin over the past two years, drastically reducing their room to maneuver and making operating flexibility very poor. The price elasticity of fabric in the market is also weak, as the breakeven point between inventory gray fabric and fresh gray fabric remains in contention. This shift in mindset is essentially a stress reaction to the sustained profit compression of the past two years. When weaving mills find that even with lower raw material prices, their bargaining power for end orders remains weak and payment cycles lengthen, 'cutting production, destocking, and waiting' becomes the most rational choice. May and June have been tough for textile workers, with the 'golden March-April' long gone and 'golden September-October' still far off. The worse the market, the higher the risks.

Low Inventories: The 'Fuse' for a Potential H2 Rally

Despite the current gloom, a noteworthy positive signal is that inventory buildup across the chain has been cautious, and production capacity utilization in H1 has been relatively limited. Current market inventories are at relatively low levels compared to the past two years. This means that once market demand picks up, a short-term supply-demand mismatch could occur, potentially restoring fabric price elasticity. When will the rally start? The market is waiting for a 'blockbuster' product, much like the 'New Chinese Style' fabric that drove demand last Spring Festival. In the near term, the most likely product to break out is summer sun-protective clothing. Unfortunately, heavy rainfall across China this summer has delayed the arrival of high temperatures, postponing demand for such clothing.

Practical Recommendations

For Buyers - With polyester factories holding high inventories, room for price cuts remains, but be wary of the risk of gradual price declines amid 'promotion fatigue.' Purchase based on actual needs to avoid buying at high levels. - Monitor signals of demand recovery in H2 (e.g., sun-protective clothing, autumn/winter fabric orders). Once a supply-demand mismatch appears, use the low-inventory window to lock in low-cost supplies quickly. - Strictly control payment cycles. When market risks are high, prioritize suppliers with good credit records.

For Exporters - With crude oil prices falling to the $75 range, cost pressure on exported goods has eased, but end-order recovery still takes time. Adjust pricing strategies flexibly. - Track the destocking pace in overseas markets, especially the timing of demand for autumn/winter fabrics in Europe and the US. Prepare samples and capacity in advance. - Use the current low-inventory, low-price window to sign long-term or forward contracts with domestic suppliers to lock in cost advantages.