A polyester factory promotion on July 6 briefly pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%. But this figure masks a deepening rift between upstream and downstream in the supply chain. Downstream users' replenishment was limited, and the market has not truly recovered.
Oil Price Transmission Fails, Upstream and Downstream Face Expectation Mismatch
International oil prices have fallen to pre-Spring Festival levels after US-Iran negotiations. As the source of the polyester chain, weaker crude should drive down polyester filament yarn prices. But polyester factories have chosen a nuanced approach—not direct price cuts, but limited-time promotions with small reductions each time, never in one go.
This 'squeeze' pricing strategy reflects upstream firms' determination to protect profits. With current operating rates at 70%, factories maintain a profit of 500 yuan per ton; if they cut prices to boost volume, profits could drop to 100 yuan per ton. More fundamentally, inventory polyester yarn was produced with high-cost raw materials, and selling at current prices would mean book losses. The polyester industry has only recently emerged from years of 'anti-involution' and is unwilling to return to a vicious cycle of selling at a loss.
But downstream weaving enterprises are not convinced. Customers, seeing oil prices drop, immediately demand 'equivalent price cuts' for fabrics. Yet fabric makers had already absorbed most of the raw material cost increases, leaving razor-thin margins. Now upstream cuts are limited, but downstream demands significant concessions—a clear expectation mismatch.
Weaving Enterprises Caught Between Output Cuts and Stockpiling
July is traditionally the season for autumn-winter fabric stockpiling, but this year weaving mill operating rates are notably low. Unlike last year, when shutdowns were due to inventory overhang from full production, this year the cause is fear of raw material price volatility. Factories dare not increase capacity.
The effectiveness of polyester promotions is diminishing. Last time, the sales-to-production ratio was just 70%; this time it exceeded 100%, but only as a rebound from extremely low demand. Actual raw material demand is limited given low operating rates. Each price drop reinforces downstream expectations of further declines, delaying stockpiling decisions.
This standoff presents two scenarios for weaving firms: optimistically, H2 demand recovers, low inventories lead to short-term fabric price increases, and inventory appreciates; pessimistically, prices remain low or fall further, and more production now means deeper losses later. For many SMEs, the next two months' capacity decisions are a gamble.
Industry Impact: From Price Game to Survival Pressure
The impact has extended from pricing to enterprise survival. Polyester factories maintain profit margins by controlling output, but may lose market share long-term; weaving firms avoid inventory risk by cutting output, but risk missing the H2 window.
Export markets are also under pressure. Overseas customers are highly price-sensitive; after oil prices fell, inquiries with aggressive price cuts increased. Chinese fabric exporters face squeezed margins amid exchange rate volatility and raw material cost uncertainty.