Recently, the domestic polyester industry has undergone a major reshuffle, with a number of leading polyester companies officially increasing their production cuts, raising the original 20% reduction to 30%, and fully entering a deep production reduction mode. The market generally interprets this move as a routine measure to reduce production and maintain prices. However, considering the current raw material market conditions, end-user demand, and the global energy situation, this large-scale production cut is not simply about stabilizing prices, but rather a strategic deployment across the entire industry chain to cope with multiple pressures, gradually highlighting deeper industry risks and market hidden dangers. Currently, the polyester industry is deeply mired in a double predicament of high costs and weak demand, with production and operational pressures continuing to intensify. Since the second quarter, upstream PX and ethylene glycol supplies have been tight, and the overall tight supply situation is difficult to alleviate. Raw material prices have remained high for a long time, continuously squeezing the profit margins of polyester companies. Downstream textile market demand remains sluggish, and end-user weaving companies are unable to withstand the heavy pressure of high raw material costs, leading to widespread production cuts and shutdowns. Market purchasing confidence is weak, and the enthusiasm for purchasing polyester filament has cooled significantly. The continued contraction in demand has directly led to a prolonged slump in polyester filament production and sales data, resulting in a continuous accumulation of finished product inventory for enterprises. Currently, the industry's inventory cycle has exceeded 30 days, with slow destocking and escalating operational pressures.
As end-user demand continues to weaken, the operating rate of the polyester industry is steadily declining, and the pace of production cuts is accelerating. Data shows that the average capacity utilization rate of the polyester filament industry previously fell to 83.96%, a significant decrease of 4 percentage points compared to the previous period, clearly indicating a trend of reduced production. Against this backdrop, leading enterprises have spearheaded a new round of production reduction plans, explicitly stating that based on the current shortage of upstream raw materials, in order to stabilize the industrial chain and boost downstream market confidence, they will continue to implement a production reduction and price maintenance strategy, with a 30% reduction to be implemented until the end of the second quarter. The policy implementation has simultaneously driven regional plant adjustments, with a 300,000-ton large-scale filament plant in Anhui province being the first to shut down for maintenance, further reducing the industry's capacity utilization rate to 82.8%. Currently, with the shutdown of older plants and the implementation of new capacity reduction plans, and no plans to resume production for previously shut-down maintenance plants, the industry's capacity utilization rate is expected to continue to decline, potentially falling to around 70%. Regarding market trends, stabilizing prices has replaced increasing shipments as the core operating objective for polyester companies at this stage. Since last week, the polyester filament market has shifted from a firm stance to a gradual decline, with prices falling by nearly 500 yuan per ton in the short term, indicating significant downward pressure on the market. Even with the gradual implementation of production reduction policies, some small and medium-sized polyester companies are still forced to slightly lower prices to promote sales due to inventory pressure. For leading companies, disorderly price reductions would trigger vicious price competition, leading to a complete market collapse and losses far exceeding those from production cuts. Coupled with the instability in the global oil market, the ongoing geopolitical conflict in the Middle East, the escalating US-Iran rivalry, and the disruption of shipping through the Strait of Hormuz, the global oil supply chain is also hampered. Although crude oil futures prices have occasionally briefly fallen below the $100 mark, spot prices remain high, with Oman crude oil spot prices consistently above $150, exhibiting frequent high-level fluctuations.
Oil price trends are volatile. Blindly raising polyester filament prices would inevitably exacerbate downstream wait-and-see sentiment and further suppress the release of pent-up demand. Therefore, stabilizing product prices has become an industry consensus. Looking at the end-user textile market, proactively scaling back production has become a last resort for companies. With the May Day holiday approaching, textile companies have largely depleted their previously accumulated raw material inventories. Most companies are operating at low capacity not because of profit, but to reduce losses and maintain basic operations. Meanwhile, tight cash flow has become a common problem in the weaving industry. There are long payment terms for grey fabric sales, while fixed expenditures such as raw material procurement, employee salaries, and production maintenance cannot be postponed, continuously consuming company cash flow. After the Spring Festival, most textile companies relied on inventory reduction to recover a small amount of funds, barely maintaining current operations. The industry as a whole is under considerable pressure, and it is expected that the scope of end-user production shutdowns and holidays will further expand after the May Day holiday. From a global macroeconomic perspective, this polyester production cut is also an early response to global economic risks. The energy crisis caused by the closure of the Strait of Hormuz has a long-term negative impact on global textile consumption. Many countries have temporarily offset the pressure of high oil prices with energy subsidies, but rising production costs are a foregone conclusion, and imported inflation is sweeping the globe, with economically weak countries being the most severely affected. High crude oil prices have significantly increased the burden on production, and with limited energy reserves in various countries, long-term supply and control measures are unsustainable, leading to a continued rise in the risk of a global economic downturn.
Overall, the increased production cuts by leading polyester companies are not only a necessary short-term measure to balance supply and demand and stabilize market prices, but also a long-term strategic move to mitigate global market volatility. Against the backdrop of high raw material prices, weak demand, and frequent geopolitical conflicts, the polyester industry in the second quarter will be characterized by low operating rates and stable prices, entering a period of adjustment as the industry awaits a gradual recovery in the market environment.
