The polyester staple fiber (PSF) industry is at a delicate balance: the geopolitical premium that inflated prices in July has faded, while strong raw material costs in mid-August provided renewed support. Yet weak downstream demand is weighing heavily on processing margins. The coordinated production cuts initiated by major producers on August 15 represent a proactive self-rescue, but whether the 'Golden September' materializes depends less on supply and more on order recovery at Keqiao fabric market.
Raw Material Divergence and Support
The raw material market shows a 'divergent but firm' pattern for PTA and MEG. For PTA, delays in restarting two major units, coupled with rainfall disruptions at eastern China ports, pushed the spot basis close to 300 yuan/ton, with August social inventory expected to hit a 44-month low. MEG also remains strong: Middle East tensions reduced import arrivals, domestic maintenance cut operating rates, and east China port inventory fell to a 15-year low, with spot premiums reaching 540 yuan/ton in early August. These low inventories provide tangible cost support for PSF, but sustainability is questionable—planned restarts of maintenance units will gradually increase supply, potentially weakening cost support by September.
Supply-Demand Imbalance and Industry Losses
In July, PSF operating rates reached 70.36%, indicating ample supply, while downstream demand remained weak. Terminal textile orders grew marginally, yarn mills held high finished inventories, and raw material purchases stayed at just-in-time levels. At Keqiao, the core fabric trading hub, gray fabric transactions contracted in August, weavers and traders stayed cautious, operating rates remained low, and PSF-based fabric sales were limited to small, scattered orders with only a few foreign orders. The upward cost pressure could not transmit smoothly to downstream fabric prices, squeezing PSF processing margins and expanding losses, spreading pessimism across the market.
Coordinated Production Cuts: Short-Term Support
On August 15, major PSF producers jointly announced a self-rescue plan: strictly managing new capacity and restarting of idle units, increasing output cuts to reduce supply, and enhancing cooperation to avoid low-price competition. Leading enterprises in Jiangsu, Zhejiang, and Fujian all participated, covering mainstream direct-spinning capacity. If implemented effectively, operating rates could fall from 70.36% to around 67%, reducing monthly supply by about 30,000 tons, easing the loose spot situation and preventing deep price drops. For Keqiao and the surrounding Xiaoshan-Shaoxing weaving cluster, tighter raw material supply will raise traders' costs, potentially limiting fabric price cuts and easing low-price competition, though fabric price increases remain difficult without clear order improvements.
Medium-Term Uncertainties: Execution and Demand
The effectiveness of production cuts faces several uncertainties. First, execution is flexible—if prices rebound and margins recover, cash-strapped enterprises may reduce cutbacks and resume operations. Second, new capacity is deferred, not canceled; once profits return, shelved capacity will be released. Third, demand remains the core constraint. Without significant order improvements in September, supply contraction alone cannot sustain a strong rally. Keqiao's transaction activity is a key window to observe 'Golden September' demand realization, focusing on actual new and repeat orders and whether weavers shift from necessity stocking to proactive restocking.
Price Outlook and Practical Advice
Based on chain-wide information, this coordinated production cut provides clear bottom support for PSF prices. As cuts take effect in late August, supply-demand structure improves, and with high raw material basis, processing margins have room to recover, easing losses. In September, as PTA and MEG units restart, cost support weakens, but downstream textile demand repair expectations may increase essential restocking, driving PSF prices upward in a volatile manner. A one-way rally is unlikely; the biggest risk is supply rebound after profit recovery—existing enterprises may relax cuts and deferred capacity may be released, capping price and margin recovery. Overall, from late August to early September, cuts will stabilize and strengthen the market; mid-to-late September will see a tug-of-war between weakening costs and demand recovery, with prices oscillating upward.