The main contract for light sweet crude oil futures on the New York Mercantile Exchange (NYMEX) rose by 4.85%, while the main contract for London Brent crude oil futures rose by 5.17%. Driven by crude oil prices, polyester raw materials such as PX, PTA, and ethylene glycol all saw price increases. However, to reduce polyester yarn inventories, polyester mills, unprecedented in their efforts, implemented a combination of production cuts and substantial promotions. As a result, polyester filament was one of the few polyester industry chain products to see a price decline last week amidst rising crude oil prices. This effectively sacrificed paper profits in exchange for inventory. This combination of measures proved immediately effective. On September 25th, the average production-to-sales ratio for polyester filament mills reached 746%, with numerous mills exceeding 1000% in a single day, with some reaching as high as 1500%, marking the largest surge in production since the peak season this year.
Given the overall weakness of the polyester market in September before this round of promotions, this shift was necessary. Following this wave of market activity, polyester mills have largely overcome inventory pressures and can now operate with a lighter load. So, what direction will polyester filament prices trend in October?
After entering October, polyester filament, which faces less inventory pressure, is unlikely to experience a short-term price drop. Considering that upstream raw material prices were rising before the holiday, while downstream polyester filament prices were falling, this trade-off has squeezed polyester filament profit margins. Polyester filament may experience a period of recovery in the period following the National Day holiday. However, it's unclear how downstream weaving companies will react to this recovery. Most companies with inventory needs have already stocked up before the holiday, and their warehouses have sufficient raw materials for the upcoming period. On the other hand, due to the weaker-than-expected textile market performance in September, weaving companies may experience a significant shutdown during this year's National Day holiday, weakening demand for raw materials. In summary, the polyester market may experience a period of recovery in the period following the holiday, but the extent of downstream acceptance remains questionable, potentially leading to a situation where prices are high but demand is limited.
The primary contradiction in the current textile market is the mismatch between existing end-user demand and high inventory and production capacity. Until this contradiction is resolved, it will be difficult for the textile market to return to a reasonable profit range. Weaving companies, under pressure from costs, will find it difficult to accept significant raw material price increases. However, resolving this contradiction is difficult. Neither downstream demand growth nor upstream capacity reduction can be achieved overnight. Currently, the only approach is to gradually mitigate the conflict through counter-involution. During this period, polyester yarn prices will likely fluctuate at a low level. Looking back at the current round of operations by polyester mills, they have not adopted the traditional strategy of reducing production and raising prices. Instead, they have reduced production while offering profit cuts, effectively reducing inventory and increasing profit margins for downstream weaving companies. Perhaps as weaving companies begin to consciously control production capacity, upstream polyester mills may also shift their operating strategies to match downstream demand. Given the increasing concentration of polyester mill capacity in recent years, and the fact that large mills are diluting production costs through integrated refining and chemical production and the development of their own complete industrial chains, this model is feasible.
