On July 6, polyester plants launched promotions that pushed the average production-sales ratio of polyester filament yarn sample enterprises to 153.8%, with downstream users moderately replenishing inventory, signaling a tentative recovery in local markets. However, behind these figures, the industrial chain is experiencing a severe breakdown in cost transmission—international oil prices have fallen from post-US-Iran negotiation highs to pre-Spring Festival levels, prompting customers to demand proportional price cuts in fabrics, while polyester plants have reduced prices far less than expected.
Malfunctioning Cost Transmission: The Logic of Upstream-Downstream Gaming
The pricing strategy of upstream polyester plants is undergoing a fundamental shift. Industry public data shows current operating rates at around 70%, corresponding to profit margins of approximately 500 yuan per ton. If prices were cut to boost sales volume, profits could plummet to 100 yuan per ton. More critically, existing inventory of polyester filament yarn was produced using high-cost raw materials, making significant price cuts unfeasible—reducing prices would mean actual losses.
Data from the China National Textile and Apparel Council indicates that the polyester industry experienced brutal price wars over the past three years, with profit margins once falling below 2%. Now, industry leaders are maintaining price floors through active production control, essentially repairing balance sheets rather than simply responding to short-term demand fluctuations. This "prefer reducing output over selling cheap" strategy reflects a shift from scale competition to profit-first orientation.
Weaving Mills' Wait-and-See Sentiment and Capacity Contraction
Downstream weaving mills exhibit classic "price decline expectation" psychology. Although the early July promotion pushed the production-sales ratio above 100%, the previous promotion achieved only 70%. National Bureau of Statistics public data shows that textile industry capacity utilization in June fell about 3 percentage points year-on-year, with weaving mill operating rates generally low.
Traditionally, July is the time to stock up for second-half autumn and winter fabrics, but this year is different. Last year's production halts stemmed from inventory buildup due to full-capacity operations in the first half; this year's capacity contraction directly results from risk aversion caused by cost volatility. Weaving mills report that volatile raw material prices make production planning difficult, and any large-scale inventory buildup risks price inversion.
Two Scenarios for the Second Half and Mills' Dilemma
The market is currently in one of the year's weakest demand periods, with overall order volumes low. However, textile enterprises cannot completely ignore preparation for the second half. Industry forecasts present two distinct paths:
In the optimistic scenario, if end-demand recovers beyond expectations in the second half, combined with current low inventory across the chain, fabric prices may rebound in the short term, rewarding early stockpilers. The pessimistic scenario sees fabric prices remaining low or declining further, meaning increased production now could lead to greater losses later.
China Customs data shows textile and apparel export growth slowed to below 5% in the first half, with weak European and American demand as the main drag. This implies second-half performance will rely more on domestic demand than exports.