On July 6, a new round of polyester factory promotions pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%, with downstream users moderately replenishing inventory and some regional markets showing signs of recovery. However, behind these seemingly impressive figures lies a complex situation of falling international oil prices and widespread customer price-cutting demands. For textile companies, whether to produce or cut production is no longer a simple operational decision but a gamble on the market trend in the second half of the year.
Cost Transmission Fails: Upstream Unwilling to Cut Prices, Downstream Hesitant to Act
After the US-Iran talks, international oil prices fell from their peaks to pre-Spring Festival levels, directly weakening the cost support for the polyester chain. Customers quickly picked up on the price reduction signals and demanded synchronized cuts in fabric prices. But textile companies find themselves in an awkward position: during the raw material price surge, fabric prices only partially followed, with most of the increase absorbed by the enterprises themselves, leaving already thin margins. Now that oil prices have dropped, customers demand "equal" reductions, but polyester factories only offer limited concessions through "promotions," not one-time price cuts.
The caution of polyester factories reflects a shift in profit logic. At a 70% operating rate, current profit can reach 500 yuan per ton; if prices are cut to boost volume, sales may rise, but profit could fall to 100 yuan per ton. More critically, existing inventory of polyester filament was mostly produced with high-cost raw materials, making the actual cost higher than paper calculations. Selling at low prices would directly lead to losses. After years of "anti-involution," polyester factories have reached a consensus: prefer production cuts to maintain price floors, rather than return to the price war quagmire of "sell more, lose more."
Weak Demand and Wait-and-See Sentiment: Traditional Stocking Season Fails
July is traditionally the peak season for downstream stocking of autumn/winter fabrics, but this year's market performance is markedly different. Weaving enterprises already have low operating rates and limited demand for raw materials. After the polyester promotion, the downstream reaction was not immediate purchasing but speculation that "prices might fall further," leading to continued wait-and-see. The latest promotion saw a sales-to-production ratio above 100%, while the previous one only reached 70%, clearly indicating fragile market confidence.
Compared to the same period last year, production halts are equally severe, but the causes have fundamentally changed. Last year's halts were mainly due to inventory buildup from full-capacity operations in the first half, forcing companies to cut production for destocking. This year, weaving enterprises have been "scared" by violent raw material price fluctuations and dare not easily ramp up production. The upstream-downstream tug-of-war has frozen market liquidity.
Capacity Decisions Become a Gamble: Two Scenarios for H2
The textile market is currently in its slowest season of the year, with few orders. But companies cannot completely ignore preparations for the second half, making capacity decisions critical. In an optimistic scenario, demand recovers in H2, and with low inventory, fabric prices rebound temporarily, turning stock into profit. In a pessimistic scenario, fabric prices remain low or fall further, and the more produced now, the heavier the losses later.
This uncertainty drives conservative decision-making. Some weaving mills reduce operating rates and digest inventory, waiting for market direction to clear. Others take a more speculative approach, betting on specific product categories to become hot in H2. Overall, industry confidence recovery will take time, and the game between polyester factories and weaving enterprises is unlikely to break soon.