A polyester promotion in early July pushed the average sales-to-production ratio of polyester filament yarn sample companies to 153.8%, seemingly signaling a market rebound. However, behind this promotion lies a complex situation where international oil prices have fallen from their highs, and customers are aggressively demanding lower prices. For many textile companies, the choice between production and output reduction has turned from a decision into a gamble.
The 'Slow Motion' of Cost Transmission vs. Customers' 'Fast Reaction'
International oil prices, after the US-Iran talks, have dropped from their yearly highs to levels before the Spring Festival. As the 'barometer' of the polyester chain, crude oil's weakness quickly transmits to downstream expectations. Customers, sensing the price decline, are demanding equivalent cuts in fabric prices. But textile companies have their grievances: when raw material prices surged, fabric price increases far from covered the cost rises; a significant portion was absorbed by the companies themselves, leaving razor-thin margins. Now that oil prices have fallen, customers immediately demand 'matching cuts,' yet polyester plants have been very conservative in lowering prices—not through direct price adjustments, but via 'promotions' with limited reductions each time, never in one go.
This means the cost-side decline hasn't smoothly passed through to the fabric side; instead, it's been 'buffered' in the middle. For buyers, this asymmetric transmission means fabric prices won't follow quickly in the short term, but if crude oil remains weak, fabric prices will eventually come under pressure.
Upstream Rationality: Prefer Cutting Load to Cutting Profit
Polyester plants are reluctant to cut prices outright, a rational choice based on careful calculation. With current plant utilization at 70%, maintaining this load yields a profit of 500; if they cut prices to boost volume, sales might rise, but profit could plunge to 100. More critically, the current inventory of polyester filament yarn was mostly produced with high-cost raw materials; selling at current prices means actual losses. This yarn must be sold slowly, not hastily.
A deeper reason is that polyester plants have finally tasted the benefits of 'anti-involution.' After years of endless price wars, no one wants to return to that quagmire. They'd rather run fewer machines and maintain price floors than fall into a 'sell more, lose more' trap. This shift from 'volume for profit' is reshaping the pricing logic of the entire chain.
Downstream Wait-and-See: Price Cuts Intensify Waiting
For weaving companies, a drop in polyester yarn prices doesn't automatically trigger restocking. Industry data shows that while the latest promotion saw a sales-to-production ratio above 100%, the previous one was only 70%. Market confidence is fragile—when prices loosen, downstream only thinks 'they might fall further' and continues to wait. Current weaving utilization is already low, limiting actual raw material demand.
July is traditionally the stocking season for autumn/winter fabrics, but this year is different: weavers have been 'burned' by violent cost fluctuations. With raw material prices swinging wildly, no one dares to add capacity easily. Production cuts are severe—unlike last year's cuts due to inventory buildup, this year's cuts are proactive due to uncertain cost expectations. The upstream and downstream are locked in a tug-of-war.
Two Scenarios for H2 and the Corporate Bet
The market is currently in its weakest period of the year, with limited orders. But textile companies cannot completely ignore preparations for the second half. The optimistic scenario: demand recovers in H2, the market turns amid low inventory, fabric prices rebound short-term, and inventory becomes a 'gold mine.' The pessimistic scenario: fabric prices stay flat or fall further; the more you produce now, the more you lose later.
For many weavers, deciding capacity over the next two months is a gamble—betting that the products they make now will suddenly become hot in H2. This 'betting on the market' mentality reflects the industry's lack of effective price discovery and hedging tools.