A polyester plant promotion on July 6 pushed the average sales-to-output ratio of DTY sample enterprises to 153.8%, with downstream users moderately restocking and local markets showing a brief recovery. But behind this figure lies a complex situation where international crude oil prices have fallen back to pre-Spring Festival levels, triggering widespread customer price-cutting demands. For textile enterprises, whether to produce or cut production has evolved from an operational decision into a gamble.
Broken Cost Transmission: Intensified Price Game Between Upstream and Downstream
International crude oil, as the 'barometer' of the polyester chain, should theoretically drive downstream product prices lower when it weakens. But in reality, polyester mills have not adopted a direct price-cutting strategy. Instead, they release price declines in batches through 'promotions,' each time with limited scope. This 'squeeze-out' pricing approach reflects the upstream sector's strong desire to maintain profit margins.
Take the current operating rate of 70% as an example. If polyester mills maintain this rate, profits can stay around 500 yuan per ton. If they slash prices to boost volume, unit profits could plummet to below 100 yuan per ton, even if sales rise. More critically, inventory DTY was mostly produced using high-cost raw materials, making the actual cost far higher than the current paper cost. Quick clearance would directly lead to book losses. Thus, choosing to cut output rather than sell cheap becomes a rational choice for polyester plants.
Downstream 'Buy on Rising, Not Falling' Mentality Solidifies, Hindering Demand Release
The response from weaving enterprises is equally telling. When DTY prices eased, downstream players did not actively increase purchases. Instead, they developed expectations of further price drops, reinforcing a wait-and-see stance. The July 6 promotion achieved a sales-to-output ratio above 100%, which was already a relatively good performance recently. In the previous promotion, the ratio was only 70%. Market confidence is as fragile as paper, and price easing actually intensifies waiting psychology.
Currently, early July is traditionally the start of the autumn-winter fabric preparation season. But this year's situation differs sharply from last year. Last year, weaving mills halted production mainly due to inventory overhang from full-capacity operations in the first half. This year, it is the violent fluctuation in raw material costs that has completely disrupted their rhythm—costs jumping up and down make any capacity increase extremely risky.
H2 Market: A Betting Game
For weaving enterprises, capacity decisions over the next two months have turned into a bet. In an optimistic scenario, demand recovers in the second half, the market turns around under low inventory, fabric prices rebound short-term, and inventory assets appreciate instantly. In a pessimistic scenario, fabric prices stay flat or fall further, meaning more production now leads to heavier losses later.
This 'betting' decision-making model reflects the deep plight of the textile chain under dual pressure from costs and demand. Upstream polyester mills maintain price floors by controlling operating rates, trying to escape the vicious cycle of 'selling more, losing more.' Downstream weaving enterprises struggle to balance dwindling orders with preparation needs.
Feedback from industrial clusters such as Shengze and Changxing indicates that operating rates at major weaving hubs are generally at year-to-date lows, with some mills cutting capacity to below 60%. Even with promotional stimuli, actual incremental demand for raw materials remains quite limited. The tug-of-war between upstream and downstream is unlikely to break soon.