On July 20, China's polyester filament yarn market experienced a sharp cooldown. According to industry data, the average sales-to-output ratio among sampled companies was only 40.6%, up 7.6 percentage points from the previous trading day but significantly lower than the weekend peak when some manufacturers saw a surge in sales and even balanced production. This data shift highlights widening price expectations between upstream and downstream sectors.
Sales Data: A Tale of Two Extremes
Detailed data reveals stark divergence among the 22 sampled companies. Only four achieved a sales-to-output ratio above 50%, with the highest reaching 70%. In contrast, eight companies recorded ratios below 30%, and the lowest was 0%. The majority clustered between 30% and 45%, indicating sluggish sales for most players. This contrasts sharply with the weekend, when some producers tested price hikes and downstream buyers initially followed.
Notably, while the average ratio improved from the previous day, it remains at a low level. For the capital-intensive chemical fiber industry, a 40% ratio signals mounting inventory pressure. If this trend persists, some companies may be forced to offer discounts, breaking the current price stalemate.
Price Game: Cost Transmission Blocked
Attempts to raise polyester filament yarn prices are meeting strong resistance from downstream weaving mills. Logically, fluctuations in upstream PTA and MEG prices should pass through to downstream fabrics and apparel. However, weak end-demand, insufficient orders, and high finished-goods inventories have left weavers with little tolerance for raw material cost increases.
This resistance is reflected in the data: weekend sales surged but collapsed on Monday. This suggests downstream purchases were driven by panic restocking or speculation rather than genuine demand. If prices continue rising, buyers will likely deplete inventories rather than chase higher prices. This leaves polyester yarn makers in a "high price, no deal" dilemma.
Inventory and Capacity: Destocking or Restocking?
Earlier data showed rapid destocking of polyester filament yarn, boosting half-year profits for some leading companies. But July 20 data suggests this destocking phase may be ending. With sales ratios back to low levels, inventory reduction is slowing and may even reverse into accumulation.
On the supply side, new capacity continues to come online, keeping overall operating rates high. Without synchronized demand growth, the structural oversupply issue may resurface. For mills, production cuts or maintenance shutdowns may become necessary to balance supply and demand when sales ratios remain below 50%.