A polyester promotion in early July pushed the sales-to-production ratio of polyester filament to 153.8%, seemingly signaling a recovery in downstream restocking. But beneath the surface lies a concentrated outbreak of profit distribution conflicts across the textile chain. International oil prices have continued to weaken since the US-Iran talks, falling back to pre-Spring Festival levels. The easing of cost pressures has not brought relief to textile mills; instead, it has intensified the price game between upstream and downstream players.
Broken Cost Transmission: Upstream's 'Profit Protection' vs. Downstream's 'Price-Cutting Wave'
Crude oil, as the pricing anchor of the polyester chain, should normally transmit cost changes sequentially from crude to PTA to polyester to fabric. But this time, clear blockage appeared at the polyester stage. Polyester plants did not directly lower their quotes; instead, they offered limited discounts through time-limited promotions, with reductions far smaller than the drop in crude oil prices. The core reason is that most of the current polyester inventory was produced during the high-price raw material period, so the book cost is much higher than the cost calculated at current raw material prices. If sold at current prices, actual profit could plunge from 500 yuan per ton to 100 yuan or even lower.
Meanwhile, downstream buyers reacted swiftly. As soon as crude oil prices fell, fabric buyers immediately demanded price cuts from suppliers, arguing that upstream costs had already dropped. But weaving mills find themselves in a difficult position: during the previous raw material price surge, fabric prices did rise, but the increase was far from covering the cost hike—most of the increase was absorbed by the mills themselves. Now that oil prices have fallen, customers demand 'proportional price cuts,' but the raw materials used for current fabric production were still purchased at high prices. Costs have not dropped in sync, squeezing profit margins from both sides.
Diverging Promotion Effects: Confidence Scarcer Than Price
The promotional strategy of polyester plants is facing diminishing marginal returns. The July 6 promotion saw the sales-to-production ratio exceed 100%, but just a week earlier, the ratio was only 70%. Downstream operating rates are already at low levels, limiting actual raw material demand. Price cuts have instead reinforced expectations of further declines, fueling wait-and-see sentiment.
This is July, traditionally the window for stocking up on autumn-winter fabrics. But this year's stocking rhythm has been completely disrupted. Last year's production halts were mainly due to inventory overhang after running full capacity in H1—a passive destocking. This year, weaving mills' caution stems more from uncertainty over raw material price volatility. Having experienced wild swings in raw material costs, companies are reluctant to build up inventory or expand production.
H2 Capacity Decisions: A Bet on Expectations
For textile mills, capacity planning for the next two months is turning into a gamble. In an optimistic scenario, H2 demand picks up, combined with low inventory levels across the chain, leading to a temporary rebound in fabric prices, turning early stockpiles into profits. In a pessimistic scenario, demand remains weak, fabric prices stay low or fall further, and the more produced now, the bigger the inventory write-down risk later.
Polyester plants face their own dilemma: continue cutting output to support prices, risking market share loss to competitors, or cut prices to boost volumes, potentially falling back into a 'sell more, lose more' price war. Based on current strategy, polyester plants prefer to defend price floors, even at the cost of lower operating rates. This 'anti-involution' consensus is forming, but for downstream weaving mills, upstream price rigidity means cost uncertainty persists.