On July 6, polyester mills launched a new round of promotions, with end-of-day data showing average sales-to-production ratio for polyester filament yarn at sample enterprises surged to 153.8%, as downstream users replenished moderately, bringing signs of recovery to local markets. Behind this figure, however, lies a complex landscape where international oil prices continue to weaken and customers aggressively demand price cuts. For textile enterprises, choosing between production and output cuts has become a gamble.
Disrupted Cost Transmission and One-Sided Customer Logic
International oil prices have fallen from highs after US-Iran talks to pre-Spring Festival levels. As the 'bellwether' of the polyester chain, weakening crude directly impacts downstream markets. Customers, sensing price decline, demand fabric prices fall in tandem. Yet textile enterprises face a dilemma: during raw material surges, much of the fabric price increase was absorbed by enterprises themselves—typically shared with customers on thin margins. Now with oil falling, customers immediately demand 'equal cuts,' but polyester mills' price reductions remain conservative, appearing as promotions with limited, incremental decreases rather than one-off adjustments.
This disruption in cost transmission reveals asymmetric bargaining power along the supply chain. Textile enterprises, caught in the middle, are constrained by upstream pricing strategies and squeezed by downstream price sensitivity. Industry data shows polyester mills' profit margins, though narrower than before, still do not justify aggressive price cuts to boost sales; instead, they opt for production cuts to maintain price floors.
Polyester Mills' Logic: Profit Over Scale
The reluctance of polyester mills to cut prices sharply stems from calculated necessity. With current capacity utilization at 70% and profit at 500 yuan per ton, if prices are slashed to boost sales, profit could drop to 100 yuan per ton. Crucially, existing inventory uses high-cost raw materials, making these stocks costly to liquidate quickly.
A deeper reason is that polyester mills have benefited from 'anti-involution' strategies. After years of price wars leading to industry-wide losses, they now prefer to reduce operating rates and maintain price floors rather than fall back into a 'sell at a loss' trap. This strategy implies that upstream supply elasticity is actively constrained, limiting the likelihood of sharp polyester filament yarn price declines in the near term.
Weaving Mills' Wait-and-See Approach and H2 Stockpiling Gamble
For weaving mills, polyester price cuts have not directly translated into purchasing. The latest promotion saw sales ratio exceed 100%, but the previous one was only 70%, reflecting fragile market confidence. Price easing actually reinforces waiting psychology: downstream believes further declines are possible and thus delays purchases.
Currently entering July, traditionally a period for stockpiling autumn/winter fabrics, capacity cuts are severe. Last year's cuts were due to overproduction and inventory buildup; this year, raw material price volatility has made enterprises cautious, unwilling to add capacity. Actual demand for raw materials remains limited given low downstream operating rates.
The H2 market presents two extreme scenarios: optimistic—demand recovers, low inventories drive fabric prices up temporarily, turning stocks into gold; pessimistic—fabric prices stay flat or fall further, meaning more production now leads to deeper losses later. For many weaving mills, deciding capacity levels over the next two months is a bet on whether their products will suddenly become popular in H2.