Polyester Chain Enters 'Low Elasticity' Game: New Market Logic Amid Oil Price Drop and High Inventories

In the first half of 2026, the polyester chain underwent a dramatic shift from a 'bull run' to a 'cold market'. As international oil prices signal a decline due to geopolitical easing, the game logic between upstream and downstream has been completely rewritten—the market no longer pays for cost increases but is dominated by extremely rational purchasing from downstream mills.

Oil Price Drop: The Cost Ceiling Is Lowering

Morgan Stanley has again lowered its oil price forecast within about two weeks, believing market focus has shifted from geopolitical risks back to global oversupply. Average spot Brent crude oil prices for Q3 and Q4 are both expected at $75 per barrel. After the lifting of the Strait of Hormuz blockade, stranded tankers are gradually departing, temporarily easing the energy crisis. International oil prices are unlikely to surge 50% in a few days as they did after the Spring Festival.

What does this mean for the polyester chain? The cost pressure on polyester filament yarn has suddenly eased. The 'crazy bull' market of early March, with prices rising thousands of yuan, is almost impossible to repeat. The lowering of the oil price ceiling gives polyester plants some profit room but also removes the price-driven incentive for downstream purchasing.

Promotion Fatigue: Why Are Weaving Mills Not Buying?

On June 29, polyester plants launched a new round of 'big promotions', but market response was tepid. Sales-to-production ratio hovered around 70% that day and quickly fell to about 30% the next day. Promotions failed to boost sales; downstream mills only made small replenishments at low prices, with no intention of large-scale stockpiling. In previous promotions, though often 'one-day wonders', sales-to-production could easily exceed 100%. Now even that brief excitement has become a luxury.

Downstream weaving mills have turned to extreme rationality: no orders, no production. Squeezed margins over the past two years have drastically reduced their flexibility, with very poor elasticity in production starts. Fabric price elasticity is also weak, and the breakeven point between inventory and new grey fabrics remains in dispute. Polyester plants offer discounts, but weaving mills won't even look—this 'promotion fatigue' fundamentally reflects downstream pessimism about weak end-demand.

High Inventories: The Dilemma of Polyester Plants

Polyester plants lack motivation to offer further discounts because their raw material inventory costs are high. But reality is harsh: POY, FDY, and DTY inventories stand at 30, 35.7, and 41.8 days respectively, and are still accumulating. If downstream continues to hold back, polyester filament may either keep falling slowly or see a more aggressive one-time clearance sale.

This dilemma—high-cost raw material inventory squeezing profits on one side, high finished product inventory tying up capital on the other—forces polyester plants to oscillate between discounting and price support. But the market has spoken: promotional marginal effects are diminishing. Unless there is a genuine demand explosion, inventory destocking will be a slow and painful process.

Second Half: Price Elasticity Opportunity from Low Inventory

Currently, the entire textile market is waiting for a catalyst. This could come from blockbuster products like last year's 'New Chinese-style' fabrics. In the short term, the most likely category is summer sun-protective clothing. Unfortunately, heavy rainfall this summer has delayed high temperatures and thus sun-protective clothing demand.

However, a positive signal worth noting: both upstream and downstream in the textile industry have adopted cautious inventory strategies, with limited capacity utilization in H1. Current market inventories are relatively low compared to the past two years. Once demand recovers, short-term supply-demand mismatches could restore fabric price elasticity.

May and June were not easy for textile players. The 'golden March-April' season is long gone, and 'golden September-October' remains distant. The worse the market, the higher the risks, and some may resort to unethical practices. Textile players must stay vigilant and closely monitor payment security.

Practical Advice

For Buyers - Maintain low inventory strategy, purchase on demand, avoid bulk buying during promotions, and be prepared for further price declines. - Watch for potential H2 blockbuster categories (e.g., sun-protective wear, New Chinese-style fabrics). Once demand signals emerge, consider locking in orders early to capture price elasticity from the low-inventory window.

For Polyester Plants - Avoid blanket promotions under high inventory pressure; consider targeted discounts by product type and customer to prioritize clearing high-inventory items (e.g., DTY). - Strengthen information sharing with downstream weaving mills to closely track order changes, adjust production rates and product mix in advance, and reduce ineffective inventory accumulation.