Polyester Promotion Traps Textile Mills in a Dilemma: Cut Output or Stock Up?

On July 6, a polyester factory promotion pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%, indicating moderate downstream restocking and a pickup in local markets. However, this figure masks a complex reality: international oil prices have fallen from their peak to pre-Spring Festival levels, and customers are aggressively demanding lower prices.

For many textile mills, the decision to produce or cut output has evolved from a routine business choice into a gamble.

The Logic of Upstream-Downstream Price Games

International oil prices, as the bellwether for the polyester chain, directly influence downstream costs. Customers, sensing a price drop, demand proportionate reductions in fabric prices. But textile mills face an asymmetric situation: when raw material prices surged, fabric price increases were largely absorbed by mills themselves; now that oil has fallen, customers demand immediate cuts, while polyester factories only offer limited discounts through promotions, never in one big move.

Why are polyester factories reluctant to cut prices outright? The core reason lies in profit calculations. Hypothetically, running plants at 70% capacity yields a profit of 500; discounting to boost volume might increase sales but could slash profit to just 100. Moreover, that 100 is only paper profit—because inventory polyester filament was produced with earlier high-cost raw materials, making its actual cost much higher than current paper costs. This inventory must be sold slowly. More fundamentally, polyester factories have finally tasted the benefits of "anti-internal competition" and are unwilling to return to price wars.

Downstream weaving enterprises are stuck in a waiting game: when polyester filament prices drop, the market expects further declines and continues to wait. The latest promotion saw sales exceed production, but the previous one achieved only 70% of production. Market confidence is fragile, and price easing actually reinforces wait-and-see behavior.

Capacity Dilemma at the Traditional Restocking Season

July is normally the season to stock up for autumn/winter fabrics, but this year weaving mills have significantly reduced capacity. Unlike last year—when shutdowns were due to overproduction and inventory buildup—this year mills are traumatized by cost volatility. Raw material prices swing wildly, and no one dares to increase production easily.

The market is currently in one of the weakest periods of the year, with limited orders. Yet textile mills cannot afford to completely ignore preparations for the second half. This creates a dilemma:
- Optimistic scenario: H2 demand recovers, low inventories create a market turnaround, fabric prices rise temporarily, and inventory becomes a hot commodity.
- Pessimistic scenario: Fabric prices stay flat or decline further; the more produced now, the heavier the losses in H2.

For many weaving mills, deciding capacity utilization over the next two months is essentially a bet—betting that the products they produce will suddenly become popular in the second half.

Practical Recommendations

For Buyers - Focus on the rhythm of polyester factory promotions rather than absolute prices. Since upstream players adopt a strategy of "small-step promotions" rather than one-time price cuts, buying windows may be short and irregular. Set price alerts and consider restocking when the sales-to-production ratio falls below 100%. - Distinguish between raw material costs and fabric costs. Customer demands for proportional fabric price cuts following oil price declines are unreasonable, as fabric costs include earlier high-cost inventory, processing fees, and fixed costs. Establish cost transparency mechanisms with suppliers to avoid one-sided price pressure.

For Exporters - Use the current order lull to reassess customer credit and payment cycles. When H2 demand recovers, prioritize customers with timely payments and stable orders to avoid being passively exposed to raw material volatility due to slow receivables. - Include raw material price fluctuation clauses in export contracts. Reference polyester raw material indices (e.g., PTA, MEG prices) to set price adjustment formulas, shifting some oil price risk to customers rather than bearing it all alone.