On July 6, a coordinated promotion by polyester mills pushed the average sales-to-production ratio of polyester filament yarn sample enterprises to 153.8%. On the surface, downstream demand seemed to have finally loosened. But the background of this promotion is far from optimistic—international oil prices have fallen from their highs, customer phone calls demanding price cuts are constant, and polyester mills' price reduction stance remains restrained: promotions rather than direct price cuts, limited reductions, and no rush to go all the way.
Upstream Logic: Profit over Scale
The shift in polyester mills' pricing strategy is noteworthy. Industry public data shows current operating rates are maintained at around 70%, with companies prioritizing per-ton profit over sales volume. Behind this are two realities: first, the cost of raw materials in inventory is high—if calculated at current raw material prices, book profits would be significantly eroded; second, after years of vicious price wars, the industry has reached a consensus of 'rather cut production than sell cheap.' This change in mindset means upstream players are no longer willing to sacrifice profit margins to maintain sales.
On the cost side, international oil prices have fallen back to pre-Spring Festival levels following US-Iran negotiations, directly weakening the cost support for the polyester chain. However, upstream players have not fully passed on the reduction to downstream mills, instead testing market reactions through limited promotions. This 'drip-feed' price reduction essentially waits for genuine demand recovery.
Downstream Wait-and-See: Diminishing Returns from Promotions
The reaction of weaving mills reveals the fragility of the current market. During the previous promotion, the sales-to-production ratio was only about 70%. While this time it exceeded 100%, much of that was a concentrated release of pent-up demand. Customers generally believe that 'oil prices have fallen, so fabric prices should drop too,' but the promotional intensity from polyester mills is far from meeting downstream psychological expectations. The result: when polyester yarn prices drop, downstream mills become even more inclined to wait—fearing they might buy at the 'midpoint.'
July is traditionally the window for stocking autumn/winter fabrics, but this year weaving mills have generally reduced operating rates. Unlike the same period last year—when production cuts were mainly due to inventory overhang—this year the cuts are driven more by fear of raw material price volatility. After experiencing a major price surge and subsequent decline, companies are reluctant to increase exposure. Capacity contraction means limited actual demand for raw materials, making it difficult for even promotions to sustain sales momentum.
Second Half Outlook: Two Scenarios, Two Risks
The market is currently in its annual low season, with order volumes generally low. But textile companies cannot completely ignore preparations for the second half. The optimistic scenario: demand recovery meets low inventory, fabric prices rebound in the short term, and inventory assets appreciate. The pessimistic scenario: fabric prices remain low or decline further—the more produced now, the greater the losses in the second half.
The core variables in both scenarios are the pace of end-consumer demand recovery and crude oil price trends. For weaving mills, production decisions over the next two months essentially amount to a gamble—betting that the products they make today will become hot sellers in the second half. However, given the current impasse between upstream and downstream, market confidence repair will take time, and the short-term stalemate is unlikely to break.