On July 6, a promotional round by polyester plants pushed the average sales-to-output ratio of polyester filament yarn sample enterprises to 153.8%, prompting moderate restocking by downstream users. While this figure would not have been remarkable in the past two years, it is a notable achievement given the current fragile market confidence.
Yet this rebound looks more like a pulse restocking event than a trend reversal. During the previous promotion, the sales-to-output ratio was only about 70%, indicating a clear desensitization to price cuts.
Upstream Profit Defense
Polyester producers are reluctant to slash prices, driven by a careful profit calculus. At a current operating rate of 70%, per-ton profit stands around 500 yuan; if they cut prices to boost volume, profit could fall to just 100 yuan. More critically, existing polyester inventory was produced using high-cost raw materials, making its book cost much higher than current feedstock prices. Selling at today's prices would realize actual losses.
From an industry perspective, polyester producers have benefited from the 'anti-involution' strategy in recent years, voluntarily abandoning the low-price volume race. They now prefer to reduce operating rates to defend prices rather than fall back into a 'sell more, lose more' trap. This approach maintains industry profit margins under low demand but also deepens the price standoff between upstream and downstream.
Downstream's 'Wait Longer for Lower Prices' Trap
For weaving mills, polyester price cuts have not sparked buying enthusiasm. It is early July, traditionally a time to stock up for autumn/winter fabrics, but orders are sparse, operating rates are low, and actual raw material demand is limited. More critically, psychologically, when prices soften, downstream mills assume further declines and thus wait.
This 'the lower the price, the longer the wait' expectation turns each promotion into a gamble: polyester plants bet that cuts will drive volume, while weavers bet that waiting will secure even lower costs. The result is volatile sales data without a meaningful reduction in overall inventory pressure.
Asymmetric Cost Transmission
International crude oil prices fell from recent highs back to pre-Spring Festival levels after US-Iran talks, directly lowering the cost anchor for the polyester chain. Downstream customers quickly demanded 'proportionate' price cuts on fabrics. But textile mills had already absorbed a significant portion of the upstream cost increases during the rally—fabric price hikes lagged far behind raw material gains, squeezing margins severely. Now that costs have fallen, customers demand full pass-through, but mills cannot cut prices correspondingly.
This asymmetric transmission—absorbing increases alone, but being forced to share decreases—is the core of current profit pressure. Polyester plants use 'promotions' instead of outright price cuts to balance profit protection with downstream sentiment.
H2: Two Scenarios in Play
The market is in its annual trough, with few orders, yet mills cannot afford to ignore H2 preparations.
- Optimistic scenario: Demand recovers in H2, fabric prices rebound temporarily against low inventory, and pre-stocked goods become profitable.
- Pessimistic scenario: Fabric prices stay low or fall further; any increase in production now deepens H2 losses.
For weaving mills, capacity decisions over the next two months amount to a bet—wagering on whether their products will suddenly attract orders in H2. This gambling mentality reflects the lack of clear price signals and demand guidance across the chain.