On August 15, China's polyester staple fiber (PSF) industry witnessed a rare collective action: major producers jointly cut output to leverage processing fee recovery. In the previous month, processing fees were squeezed, losses widened, and pessimism spread. Whether this cut becomes a turning point or another short-lived pulse depends on execution and real demand recovery.
Background
In July, PSF prices surged on geopolitical tensions, with East China spot prices hitting 7,675 yuan/ton. But in early August, as US-Iran tensions eased, geopolitical risk premiums faded, weakening cost support. Meanwhile, expectations of PTA unit restarts pressured the polyester chain. By mid-August, stronger upstream feedstock lifted PSF prices again, but processing fees remained low, and losses persisted.
Feedstock markets showed divergent strength. Two core PTA units delayed restarts, and rainfall disrupted port operations in East China, pushing basis near 300 yuan/ton. August social inventories may hit a 44-month low, providing cost support for PSF. Ethylene glycol was also firm: Middle East tensions and strait blockages reduced imports, domestic maintenance kept operating rates low, and East China port inventories fell to a 15-year low, with spot premiums reaching 540 yuan/ton in early August. However, later restarts will add supply, risking weaker cost support.
Industry Impact
Supply-demand mismatch is the root cause of losses. In July, PSF operating rates reached 70.36%, with ample supply and new capacity planned for H2. Downstream demand was weak: yarn mills held high finished goods inventories, purchasing only on a need basis, with no substantial recovery in domestic or export orders. At Keqiao textile market, gray fabric transactions contracted, weavers ran at low rates, and merchants bought hand-to-mouth. PSF-based fabrics moved in small lots, and upstream price hikes failed to transmit downstream.
This cut is proactive market adjustment, not passive shutdowns. Leading enterprises in Jiangsu, Zhejiang, and Fujian all participated, covering mainstream direct-spinning capacity, marking the industry's entry into a profit-protection cycle. With July operating rates at 70.36%, if executed fully, rates could fall to around 67%, reducing monthly supply by about 30,000 tons and easing spot oversupply. Keqiao and surrounding Xiaoshan-Shaoxing weaving clusters will directly feel supply-side changes, with rapid transmission to yarn trading, weaving, and fabric distribution.
But medium-term effects are uncertain. Cut implementation is flexible; if prices rebound and processing fees improve, cash-strapped firms may reduce cuts. New capacity is deferred, not canceled, and will return once profits recover. Demand remains the core constraint; without clear order improvement in September, supply cuts alone may not sustain strength. Keqiao's transaction activity is a key window for observing "Golden September" demand, requiring attention to new and repeat orders and whether weavers shift from need-based to active restocking.
Practical Recommendations
Overall, this coordinated cut provides clear price support. As cuts take effect in late August, supply-demand structure improves, and with high feedstock basis, processing fees have room to recover, easing losses. In September, PTA and ethylene glycol restarts will weaken cost support, but demand recovery expectations may boost need-based restocking, pushing PSF prices higher in a volatile manner. However, a one-way rally is unlikely; the biggest risk is supply rebound after profit recovery, so prices may fluctuate.