In early July, a promotion by polyester plants briefly warmed the market—end-of-day data showed the average sales-to-production ratio for polyester filament yarn sample enterprises soared to 153.8%, with downstream users making moderate replenishments. But this number masks a harsher reality: international oil prices have fallen back to pre-Lunar New Year levels following US-Iran talks, and customers are aggressively demanding price cuts, leaving textile firms squeezed between cost pressures and weak demand.
Upstream Calculus: Cutting Load Beats Cutting Prices
Polyester plants are extremely restrained in their pricing. It's not that they don't want to sell; it's that selling more means losing more. Assuming plants run at 70% capacity with a profit margin of about 500 yuan per ton, slashing prices to boost volume could shrink that margin to just 100 yuan. More critically, existing inventory was produced with high-cost raw materials, making its book cost far higher than current feedstock prices. These stocks must be sold slowly.
After years of anti-price-war efforts, polyester plants have tasted the benefits of profit recovery. They prefer reducing operating rates to maintain price floors rather than falling back into the vicious cycle of 'selling more, losing more.' This rational output reduction strategy stabilizes prices in the short term but deepens the standoff across the supply chain.
Downstream Hesitation: Discounts Trigger Wait-and-See
For weaving mills, lower polyester prices don't automatically translate into purchases. Market confidence is fragile; once prices soften, the first reaction downstream is 'they might fall further.' The latest promotion saw a sales-to-production ratio above 100%, but the previous one managed only 70%, indicating limited actual demand and a strong reliance on price expectations for restocking.
July is traditionally the season for stocking autumn/winter fabrics, but this year, weavers have been traumatized by cost volatility. Last year's production halts stemmed from inventory gluts after full-capacity runs in the first half; this year, it's a proactive contraction. With raw material prices swinging wildly, no one dares to add capacity easily. Capacity decisions have become a gamble: betting that the products made today will suddenly become hot in the second half.
Second-Half Scenario: Low Inventory Is Both Opportunity and Risk
The optimistic scenario: demand recovers in H2, the market turns on low inventories, fabric prices rebound short-term, and inventory becomes a 'hot commodity.' The pessimistic scenario: fabric prices stay flat or fall further; the more you produce now, the more you lose later.
The key variable is the pace of final-order recovery. Current order volumes are low, but textile firms cannot afford to ignore preparation for the second half. How much capacity to run and how much inventory to hold remains a puzzle with no standard answer.