On July 6, a round of promotions by polyester plants pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%, with downstream users replenishing moderately. But behind this figure lies a complex situation where international oil prices have fallen and customers are aggressively demanding lower prices. For many textile mills, the decision between production and output cuts has become a gamble.
The Break in Cost Transmission
International oil prices have fallen from their peak after the US-Iran negotiations to levels before the Spring Festival rally. As the bellwether for the polyester supply chain, crude oil's weakness directly transmits downstream. Customers, sensing price drops, demand proportional reductions in fabric prices. However, textile mills face a classic break in cost transmission: when raw material prices soared, fabric prices increased only partially, with most of the hike absorbed by mills, leaving razor-thin margins. Now that oil prices have fallen, customers demand equivalent cuts, but polyester plants have been conservative in their reductions—not by lowering list prices directly, but through promotions with limited discounts each time, never fully passing through the decline.
This asymmetric transmission means downstream weaving mills can neither fully pass on cost increases during upstream rallies nor receive equivalent cost relief during upstream declines. Profit margins remain squeezed.
Rationality and Resignation of Polyester Plants
The reluctance of polyester plants to cut prices outright is a mix of calculation and resignation. With current plant utilization at 70%, profit stands at about 500 yuan per ton; if they cut prices to boost volume, sales might rise, but profit could plummet to 100 yuan per ton. More critically, that 100 yuan profit is theoretical—existing inventory of polyester filament uses high-cost raw materials from earlier periods, so actual costs are much higher. That inventory can only be sold slowly; rushing is not an option.
A deeper reason is that polyester plants have finally tasted the benefits of ending the 'rat race'. The endless price wars of previous years are something no one wants to revisit. Better to reduce operating rates and maintain price floors than to fall back into the quagmire of 'selling more, losing more'. This strategic contraction is essentially a collective defense of industry profit baselines.
The Dilemma of Weaving Mills
For weaving mills, lower polyester prices do not automatically trigger purchases. The reality is a tug-of-war along the supply chain: when polyester prices drop, downstream expects further declines and waits. The latest promotion saw the sales-to-production ratio exceed 100%, but the previous promotion only reached 70%. Market confidence is fragile; price easing actually reinforces wait-and-see behavior.
It is now early July, traditionally the time for stockpiling raw materials for autumn/winter fabrics. But capacity cuts are severe. Unlike last year—when shutdowns were due to overproduction and inventory buildup—this year, weaving mills have been traumatized by cost volatility. Raw material prices swing wildly, and no one dares to increase commitments easily. Downstream operating rates are already low, so actual demand for raw materials is limited.
Two Scenarios for the Second Half
The current market is in one of the slowest periods of the year, with order volumes low. But textile mills cannot completely ignore preparations for the second half.
Optimistic scenario: demand recovers in H2, the market turns around amid low inventory, fabric prices rebound in the short term, and inventory becomes a hot commodity.
Pessimistic scenario: fabric prices remain at current levels or fall further; the more produced now, the heavier the losses in H2.
For many weaving mills, how much capacity to run in the next two months is a gamble—betting on whether their products will suddenly become popular in the second half. This gambling mentality reflects the industry's information asymmetry and demand uncertainty.