On July 6, polyester factories' promotion pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%. While this figure appears robust, it masks a tug-of-war between upstream and downstream over costs and profits.
Imbalanced Cost Transmission
International oil prices fell after US-Iran negotiations, directly impacting the cost base of the polyester chain. Clients quickly seized the signal, demanding proportional fabric price cuts. However, textile firms find this unfair—when raw material prices surged earlier, fabric prices did not rise fully, with much of the increase absorbed by enterprises, already squeezing profit margins. Now, upstream polyester plants are cautious in reducing prices, mostly offering limited promotions rather than outright cuts.
Upstream Profit Preservation
Polyester plants' reluctance to cut prices stems from careful profit calculations. At 70% capacity utilization, profit reaches 500 yuan/ton; discounting to boost volume might raise sales but reduce profit to 100 yuan/ton. Crucially, existing polyester inventory uses high-cost raw materials, making immediate massive sales unprofitable. Moreover, polyester plants have benefited from recent anti-price-war efforts and are unwilling to return to destructive competition. They prefer lower utilization to maintain price floors.
Downstream Wait-and-See
Weaving enterprises react cautiously. After polyester price cuts, downstream clients expect further declines and choose to wait. The latest promotion achieved over 100% sales ratio, but the previous one only 70%, indicating fragile confidence. July is traditionally the stocking season for autumn/winter fabrics, but capacity cuts are severe. Unlike last year's inventory-driven stoppages, this year's caution stems from fear of raw material price volatility—nobody dares to increase production aggressively.
Two Scenarios for H2
The market is in its weakest period annually, with limited orders. Optimistic scenario: H2 demand recovers, low inventory lifts fabric prices temporarily, turning stocks into profits. Pessimistic scenario: fabric prices stay flat or fall, and more production leads to deeper losses. Capacity decisions over the next two months are a gamble for many weaving firms—betting their products will gain popularity in H2.
Deeper Chain Conflict
This tug-of-war reveals structural profit distribution imbalances in the textile chain. Upstream polyester plants maintain profits through capacity control, while midstream weavers face dual pressure from costs and demand. For buyers, now is not the best time to stockpile heavily, as further price drops remain possible. For foreign trade firms, exchange rate fluctuations and overseas demand uncertainty require cautious order and inventory management.