Polyester Industry Chain in a Game of Chess: Production Cuts and Wait-and-See Become Mainstream Strategies for Textile Mills

On July 6, a polyester factory promotion pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%, prompting moderate restocking by downstream users. However, this figure masks a chain reaction triggered by falling international oil prices—customers are demanding price cuts on fabrics, citing lower crude costs.

Cost Transmission and Game Dynamics

The weakening of international oil prices directly transmits to the polyester chain. As crude serves as the bellwether for polyester, its decline from post-Lunar New Year highs quickly signals price drops downstream. Customers, sensing an opportunity, demand concessions from textile mills. Yet mills face a dilemma: when raw material prices surged, most fabric price increases were absorbed by the mills themselves, leaving thin margins. Now, with oil falling, customers demand proportional reductions, but polyester factories are cautious in their price cuts.

Polyester plants use "promotions" rather than direct price adjustments, with each reduction limited. The reason: current plant operating rates are around 70%. If they cut prices to boost volume, profits could fall from 500 to 100 per unit, and existing inventory uses high-cost raw materials, making real costs much higher. Polyester plants are unwilling to return to the price wars they fought before "anti-involution" efforts began, preferring to cut production to maintain price floors.

Weaving Mills' Wait-and-See Stance

For weaving mills, lower polyester filament prices do not spur buying; instead, they reinforce expectations of further declines. The latest promotion saw sales-to-production exceed 100%, but the previous one managed only 70%, indicating fragile market confidence. Currently in the traditional July off-season, which is normally a time for stocking autumn/winter fabrics, weaving mills are hesitant to increase capacity due to volatile raw material costs.

This year differs from last: last year's production stoppages stemmed from overcapacity and inventory buildup in the first half; this year, mills are traumatized by cost fluctuations. With operating rates already low, actual demand for raw materials is limited, and the upstream-downstream tug-of-war continues.

Uncertainty in the Second Half

The market is in its slowest period of the year, with few orders. Yet textile firms cannot fully ignore preparation for the second half. An optimistic scenario: demand recovers in the second half, low inventory leads to a short-term fabric price rebound, and inventory becomes profitable. A pessimistic scenario: fabric prices remain flat or fall further, and the more produced now, the bigger the loss later.

For weaving mills, deciding production capacity in the next two months is a gamble—betting that their products will suddenly become popular in the second half. Industry data shows polyester plants prefer reduced output over lower prices. Whether this strategy holds depends on whether end-user demand recovers meaningfully after September.

Practical Recommendations

For Buyers - Monitor polyester plant operating rates: if they stay below 70%, raw material downside is limited; consider moderate restocking. - Use promotional events for phased purchasing: avoid bulk purchases to hedge against further price drops. - Negotiate short-term price agreements with suppliers to lock in some raw material costs against oil volatility.

For Textile Mills - Control production pace: avoid overcapacity; produce to order to reduce finished goods inventory. - Strengthen cost accounting: use current low-cost raw materials for production, but manage the digestion cycle of high-cost inventory to avoid loss-making sales. - Monitor autumn/winter fabric order trends: if orders do not pick up by September-October, further cut production to prevent inventory pressure.