On July 6, a new round of polyester factory promotions pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%, prompting downstream users to replenish moderately and bringing a semblance of recovery to local markets. However, behind this figure lies a complex situation where international oil prices have fallen to pre-Spring Festival levels following US-Iran negotiations, and customers are aggressively demanding price cuts.
The Broken Cost Pass-Through Chain
Crude oil, as the bellwether of the polyester chain, weakened and transmitted directly downstream. Customers demanded equivalent price reductions on fabrics, but textile companies face a dilemma: during the raw material surge, fabric price increases were limited and largely absorbed by enterprises themselves, squeezing margins thin. Now that oil prices have fallen, polyester factories are reducing prices through 'promotions' rather than direct cuts, with limited reductions that avoid one-step adjustments. This has created a clear break in cost pass-through between upstream and downstream.
The conservative strategy behind polyester factories is driven by profit calculations: operating at 70% capacity yields a margin of 500 yuan per ton, while discounting to boost volume could slash margins to just 100 yuan per ton—and even that is only on paper, as current inventory uses high-cost raw materials. The deeper reason is that polyester factories have tasted the benefits of 'anti-involution' and are reluctant to return to endless price wars. They prefer to reduce operating rates to maintain price floors rather than fall into a 'sell more, lose more' trap.
Weaving Companies' Production Cuts and Wait-and-See
For weaving enterprises, polyester yarn price cuts may not necessarily stimulate purchases. The industry chain is in a tug-of-war: once polyester yarn prices drop, downstream expects further declines and continues to wait. The latest promotion saw sales-to-production ratios exceed 100%, but the previous promotion only hit 70%, reflecting fragile market confidence. July is traditionally the stocking season for autumn/winter fabrics, but capacity closures are severe—unlike last year, when closures were due to overproduction and inventory buildup, this year they are driven by volatile raw material costs that have left weaving companies wary of adding capacity.
Downstream operating rates are already low, limiting actual demand for raw materials. During the industry's quietest period with few orders, textile companies face a tough choice: cut production or stockpile? The optimistic scenario sees H2 demand recovery, with low inventories triggering short-term fabric price rebounds and turning stockpiles into assets. The pessimistic scenario sees fabric prices remaining flat or falling, making current production a liability for H2 losses.
The Q3 Capacity Gamble and Practical Advice
How much capacity to run over the next two months is a gamble for weaving companies—betting that the products they produce will become hot sellers in H2. This gamble stems from information asymmetry and demand uncertainty along the chain. While polyester factory promotions provide short-term sales boosts, they cannot resolve the fundamental weakness in downstream confidence. Q3 market direction depends on whether end demand truly recovers and whether upstream and downstream can find a new equilibrium in cost pass-through.