A polyester plant promotion in early July triggered a wave of restocking, pushing the average sales ratio of polyester filament yarn sample enterprises to 153.8%. But beneath these numbers lies a far more complex cost tug-of-war between upstream and downstream players.
The Fractured Transmission of Costs
International crude oil prices fell back to pre-Spring Festival levels after US-Iran negotiations, directly impacting the pricing logic of the polyester chain. Downstream clients quickly used the oil drop as leverage to demand equivalent price cuts on fabrics. However, textile mills face a more complicated reality: during the previous raw material price surge, fabric price increases lagged far behind, with most cost hikes absorbed by weavers. Now that oil has fallen, clients demand full pass-through, but upstream polyester plants are extremely cautious—using promotions rather than direct price cuts, with each reduction limited in scope.
This fractured transmission mechanism means weavers can neither secure enough price relief from upstream nor resist aggressive bargaining from downstream, squeezing margins further.
Polyester Plants' 'Output Cap to Protect Price' Strategy
Polyester plants' reluctance to cut prices reflects a calculated profit model. Industry data shows that at current operating rates around 70%, per-ton profit stands at about 500 yuan; if they cut prices to boost volume, profit could plummet to 100 yuan or less. Critically, existing polyester inventory was produced with high-cost raw materials, making cost calculations distorted at current feedstock prices. This high-cost stock must be liquidated slowly; rushing to cut prices would only deepen losses.
Strategically, the polyester industry has benefited from recent 'anti-involution' efforts—avoiding endless price wars to maintain price floors. Major players now prefer output cuts over returning to the 'sell more, lose more' trap. This strategy supports prices in the short term but keeps downstream restocking appetite weak.
Weavers' Dilemma
For weaving mills, the core decision today is whether a raw material price drop signals a buying window or a falling knife. July is traditionally the start of autumn/winter fabric preparation, but capacity shutdowns are more widespread than last year. Unlike last year's inventory-driven cuts, this year's caution stems from fear of volatile raw material prices—no one dares to add capacity when direction is unclear.
The divergence in recent promotion results is telling: this time sales exceeded 100%, while the previous one only reached 70%. This reflects extremely fragile market confidence: when promotions lack bite, wait-and-see attitudes dominate immediately. With low downstream operating rates, actual raw material demand is limited, and restocking is more speculative than essential.
Key Variables for H2
The market is in its seasonal trough, with orders scarce. Yet textile firms cannot fully ignore H2 preparation. The optimistic scenario: demand recovery meets low inventory, fabric prices rebound temporarily, and stock quickly monetizes. The pessimistic scenario: prices stay flat or fall further, meaning any production today becomes a loss tomorrow.
Capacity decisions over the next two months are essentially a bet—on whether the products being made now will suddenly become popular in H2. This uncertainty is forcing firms to manage inventory and cash flow with unprecedented precision.