Polyester Industry Enters 'Rational Game': New Variables Amid Low Inventories and Receding Oil Prices

Promotional efforts are intensifying, but downstream buyers are barely interested. On June 29, polyester factories launched a new round of price cuts, yet the production-sales ratio hovered around 70%, before plummeting to 30% the next day. Compared to previous promotions—where even 'one-day wonders' easily exceeded 100% of sales—the current market apathy is unprecedented. This 'promotion fatigue' reflects extreme rationality among downstream weaving mills: no orders, no production; purchases are limited to small, opportunistic restocking, with no large-scale inventory building.

The Cost Ceiling Lowers A key variable supporting polyester prices—crude oil—is receding. With the Strait of Hormuz reopened, stranded tankers are departing, easing the energy crisis in the short term. Morgan Stanley has again lowered its oil price forecast within two weeks, shifting focus back to global oversupply, with Brent crude expected to average $75/barrel in Q3 and Q4. This means the cost pressure on polyester filament yarn has eased sharply, making a repeat of the 'crazy bull' run seen in early March unlikely. The lower oil ceiling has stripped polyester factories of the narrative to push prices higher based on costs.

High Inventories vs. Profit Squeeze Despite weaker cost support, polyester factories have limited room to cut prices—they are still digesting high-cost raw material inventories. As of late June, POY, FDY, and DTY inventories stood at 30, 35.7, and 41.8 days respectively, and are still accumulating. Factories face a dilemma: further price cuts would squeeze already thin margins, but holding prices risks even larger stockpiles as buyers stay away. The market is forming an expectation of 'creeping declines'—if downstream demand does not pick up, polyester prices may slide slowly, or a more aggressive sell-off could occur.

The Elasticity Hidden in Low Inventories On the flip side, both upstream and downstream players have kept stockpiling cautious. Capacity utilization in the first half was limited, and current finished goods inventories are relatively low compared to the past two years. If demand shows a meaningful recovery—driven by a hit product category (like last year's 'New Chinese-style' fabrics or summer sun-protection clothing)—a supply-demand mismatch could emerge quickly, restoring price elasticity in fabrics. This year, heavy rainfall has delayed the arrival of high temperatures, postponing demand for sun-protective clothing, but this variable remains worth watching.

A New Phase: Demand-Driven Market In summary, the polyester chain is shifting from 'cost-driven' to 'demand-driven' dynamics. Profit margins have been squeezed over the past two years, leaving companies with little flexibility and poor capacity utilization elasticity. Fabric price elasticity is also fragile, with breakeven points still being contested between inventory and fresh gray goods. For a real upturn to begin, substantial improvement in downstream orders is needed, not just fluctuations in raw material costs. The 'golden September and silver October' are still far off, but the combination of low inventories and potential demand recovery sets the stage for price elasticity in the second half.

For Buyers - Monitor inventory inflection points: If polyester factory inventories decline for two consecutive weeks, it may signal a price floor—consider phased restocking. - Beware of 'promotion traps': Current discounts mostly aim to clear high-cost inventory, not a trend—avoid overstocking based on short-term low prices. - Watch crude oil and weather: If oil falls below $75, polyester cost support weakens further; if high temperatures arrive, sun-protection fabric demand could spike.

For Exporters - Adjust pricing strategies: Use floating pricing or short-term fixed pricing to hedge against single-direction risk in an uncertain cost environment. - Target regional demand shifts: As Middle East tensions ease, energy-intensive textile orders may gradually recover—engage with relevant markets early. - Strengthen payment collection: In a downturn, default risks rise—shorten payment terms or increase down payment ratios.