A recent polyester promotion in early July briefly pushed the sales-to-production ratio of some polyester filament yarn producers to 153.8%. But behind the flashy numbers, the textile supply chain is in the midst of an unprecedented 'profit defense' battle.
The Profit Game Behind Promotions
On July 6, polyester factories launched a new round of promotions, with sample enterprises reporting an average sales-to-production ratio of 153.8% at the close. On the surface, this signals moderate restocking by downstream users, but the real driver is not demand recovery—it's upstream's strategic concession under cost pressure. International oil prices have fallen from their peak after the US-Iran negotiations back to pre-Spring Festival levels. As the barometer of the polyester chain, weaker crude oil directly impacts downstream. Customers are demanding lower fabric prices with a simple logic: if crude is down, why isn't fabric down?
Yet the price cuts from polyester factories are quite restrained—not through direct price reductions, but through promotions with limited discounts each time. Behind this is a carefully calculated profit equation: when plant utilization is at 70%, profit per ton is around 500 yuan; if they cut prices to boost volume, profit could drop to just 100 yuan per ton. Moreover, current inventory of polyester filament was produced with high-cost raw materials, making its actual cost much higher than paper calculations. These stocks can only be slowly digested.
Polyester factories have learned from the 'anti-involution' efforts of recent years—the endless price wars of the past left the entire industry in the red. Now they prefer to run fewer machines and defend price floors rather than return to a 'sell more, lose more' quagmire. This signals a shift from 'volume priority' to 'profit priority' upstream, with proactive capacity control to preserve price lines.
Downstream: Price Cuts Fuel Wait-and-See
For weaving mills, lower polyester prices haven't triggered the expected buying spree. The supply chain is locked in a classic price game: when polyester prices fall, downstream only expects further drops and waits. The early July promotion saw sales ratios above 100%, but the previous promotion had only 70%. Market confidence is fragile—price loosening actually intensifies wait-and-see behavior.
July is traditionally the period for stocking up on autumn/winter fabrics for the second half. But weaving mills' utilization rates are already low, limiting actual demand for raw materials. Unlike last year—when mills ran full capacity early, accumulated inventory, and then proactively shut down to destock—this year mills are spooked by cost volatility. With raw material prices swinging wildly, no one dares to add capacity.
This tug-of-war means even promotional boosts won't create sustained buying. Mills prefer to maintain low inventory operations, waiting for clearer cost floor signals.
Two Scenarios for the Second Half
The market is in its slowest season, with few orders, but mills cannot fully ignore preparation for the second half.
Optimistic scenario: Demand recovers in H2, low inventories trigger a turnaround, fabric prices rebound short-term, and current low-cost stocks become profit sources.
Pessimistic scenario: Fabric prices stay flat or fall further; the more you produce now, the more you lose later. For weaving mills, the next two months' capacity decisions are a gamble—betting that what they make today will suddenly be in demand in H2.
- Weaving mills face a 'stock up vs. cut output' choice, hinging on their judgment of H2 demand pace
- Polyester factories' 'profit priority' strategy won't change soon; promotions will persist but with limited scope
- International oil prices remain key: if crude falls further, polyester mills' profit floors will be tested