Polyester Promotions Fail to Break Stalemate: Textile Supply Chain in a Game of Supply and Demand

On July 6, a new 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 modestly replenishing stock and localized market warming. However, behind this figure lies a complex reality: international crude oil prices have fallen from their peak after US-Iran negotiations back to pre-Spring Festival levels, and cost-side weakness is transmitting down the supply chain. Customers armed with oil price charts demand fabric price cuts, yet polyester plants respond with "promotions" rather than direct price reductions, limiting both the magnitude and pace of cuts.

Cost Transmission and Pricing Game

Crude oil, as the bellwether of the polyester supply chain, transmits its price fluctuations through intermediates like PTA and MEG to polyester filament yarn and ultimately to fabric costs. But this transmission is not linear. According to China Customs data, current polyester plant operating rates hover around 70%, with margins still decent at about 500 yuan per ton. If they cut prices to boost volume, sales might rise, but unit profit would plunge to around 100 yuan. Critically, existing inventory of polyester filament yarn was produced using higher-priced raw materials, making the book cost far above current raw material prices. Selling at a discount would mean real losses.

Thus, polyester plants choose not simple "price cuts for volume" but "reduce output to protect margins." This reflects lessons from years of "anti-involution" in the industry—endless price wars only drag the entire chain into a spiral of selling more but losing more. Better to cut production and defend price floors than repeat past mistakes. This pricing strategy limits fabric mills' room to offer discounts in the short term but objectively slows the pace of price declines.

Weaving Mills: The Dilemma of Stockpiling vs. Cutting Output

For weaving mills, polyester promotions do not signal buying opportunities but deepen wait-and-see attitudes. Industry data shows that in early July, loom operating rates in Jiangsu and Zhejiang had fallen to around 60%, lower than the same period last year. More notably, during the previous promotion, the sales-to-production ratio was only 70%. This time, exceeding 100% was more due to stronger promotional intensity and some essential demand release, not a genuine demand recovery.

The core contradiction for weaving mills is: raw material prices are volatile, and second-half order prospects are unclear. Traditionally, July is the time to stock up for autumn/winter fabrics, but this year companies are reluctant to increase positions. Unlike last year's proactive output cuts due to inventory overhang, this year's caution stems from fear of cost fluctuations—fear of buying at peaks, fear that products made now won't be hot in the second half. How much capacity to run has become a gamble. Optimists bet on demand recovery and low inventories triggering price rebounds; pessimists bet on further price declines, where more production means bigger losses.

Key Variables for the Second Half

The market is in its typical off-season, with limited order volumes. But textile companies cannot fully ignore preparations for the second half. Two variables matter: first, whether demand recovers as expected in August-September; second, the pace of inventory digestion at polyester plants.

If domestic and export orders improve simultaneously, low inventory levels would amplify price elasticity, allowing fabric prices to rebound quickly and turning inventory into profit. But if demand stays weak, polyester plants' "slow price cut" strategy may drag on weaving costs, while fabric prices face end-customer pressure, squeezing intermediate margins further.

Feedback from major fabric clusters like Shengze and Keqiao indicates that traders are adopting "small batch, multiple delivery" procurement strategies, unwilling to build inventory. This means even polyester promotions only absorb essential demand, not restocking demand. Inventory is shifting from polyester plants to weaving mills, but weaving mills are not passing it downstream, leaving risk concentrated at the intermediate stage.

Practical Recommendations

For Buyers - Monitor polyester plant operating rates and inventory days: if rates stay below 70% and inventories rise, upstream still has room to cut prices; consider delaying large orders. - Use promotion windows for phased purchasing: current promotional discounts are limited, but essential orders can lock in some low-cost raw materials to avoid being caught off guard by a price rebound. - Negotiate short-term floating price agreements with suppliers to share raw material price risk and avoid bearing full cost pressure alone.

For Textile Mills - Control finished product inventory: when orders are uncertain, it's better to cut output than to accumulate fabric, especially for commodity grades. - Optimize product mix: shift capacity toward differentiated, higher-value-added products to reduce sensitivity to bulk raw material price swings. - Establish a flexible raw material procurement mechanism: set price alert thresholds and replenish at promotion windows as needed, rather than making one-time large purchases.