7,675 yuan per ton - that was the peak spot price of polyester staple fiber in East China in July, driven by crude oil costs pushed up by Middle East conflicts. However, the geopolitical premium faded as quickly as it came. In early August, tensions eased, and the pull from raw materials weakened sharply, forcing the industry to confront an awkward reality: ample supply, sluggish demand, squeezed processing margins, and widening losses.
Raw Material Divergence and Cost Game
The raw material market currently shows a divergent but firm pattern. For PTA, the restart of two major units was delayed, coupled with rainfall disrupting port loading in East China, pushing the spot basis close to 300 yuan/ton, with social inventories expected to fall to a 44-month low in August. Ethylene glycol also remained strong, with import arrivals declining due to Middle East tensions, domestic units under concentrated maintenance, and East China port inventories dropping to a 15-year low, with spot premiums reaching as high as 540 yuan/ton in early August. Low inventories provide cost support for staple fiber, but the hidden danger is that later, both PTA and ethylene glycol have maintenance units scheduled to restart, adding supply and weakening cost support. For staple fiber plants, this means the current cost dividend window is limited, and production cut decisions must be implemented before raw materials turn weaker.
Supply-Demand Mismatch and Industry Self-Rescue
Supply-demand mismatch is the root cause of industry losses. In July, the operating rate of polyester staple fiber was as high as 70.36%, with ample spot supply and new capacity planned for the second half. Downstream terminal textile orders saw limited growth, yarn mills had high finished goods inventories, and procurement was limited to just-in-time replenishment. Both domestic and export orders lacked substantial recovery. In Keqiao Light Textile City, grey fabric transactions contracted overall, weaving enterprises operated at low rates, and merchants bought on demand, making it difficult for raw material price increases to transmit to fabric terminals. Against this backdrop, on August 15, major producers jointly launched a self-rescue plan: strictly controlling new capacity, postponing restart of idle units, actively reducing production loads, and abandoning vicious low-price competition. Leading enterprises in Jiangsu, Zhejiang, and Fujian all participated, covering mainstream direct-spun capacity, marking the industry's formal entry into a production-cut profit-protection cycle.
Production Cuts Support the Bottom, Demand Remains the Test
In the short term, production cuts can provide bottom support to the market. If industry self-discipline is effectively implemented, the operating rate could fall to around 67%, reducing monthly supply by about 30,000 tons. Combined with low inventories of some brand sources and tighter spot circulation, this can prevent deep price declines. For Keqiao Light Textile City, tighter raw materials will raise traders' procurement costs, limiting fabric price reduction space and easing low-price competition to some extent. However, without clear order improvement, fabric price hikes will still face significant resistance.
In the medium to long term, the effectiveness of production cuts faces multiple uncertainties. First, execution flexibility: if prices rebound and processing margins recover, cash-strapped enterprises may reduce cut levels. Second, new capacity is postponed, not canceled; once the industry returns to profitability, supply pressure will resurface. Third, demand is the core constraint; if September terminal orders do not improve, supply contraction alone cannot sustain a strong rally. The transaction activity in Keqiao Light Textile City is a key window to observe the realization of 'Golden September' demand. Attention should be paid to actual increments in new and repeat orders, and whether weaving enterprises' replenishment willingness shifts from just-in-time to active stocking. If market transactions fail to recover effectively, the boost from production cuts will be greatly diminished.
Price Rhythm and Risk Warning
Based on information from the entire industrial chain, this round of coordinated production cuts can clearly underpin staple fiber prices. As cuts are implemented in late August, supply-demand structure improves, and with high basis from upstream raw materials, processing margins have room to recover, improving corporate losses. Entering September, PTA and ethylene glycol units will restart intensively, weakening raw material cost support, but downstream demand recovery expectations may increase just-in-time replenishment, driving staple fiber prices upward in a volatile manner. However, a one-sided rally is unlikely; the biggest risk lies in supply rebound after profit recovery - both existing enterprises loosening cuts and delayed capacity being released will suppress price and margin recovery, leading to repeated market fluctuations.
Price rhythm forecast: from late August to early September, production cuts will stabilize and strengthen the market, with processing margins gradually recovering; in mid-to-late September, the market will oscillate upward amid the tug-of-war between weakening costs and demand recovery. Subsequent monitoring should focus on the actual implementation of major producers' cuts, upstream and downstream unit restart progress, and key indicators such as yarn mill operating rates, terminal orders, and downstream replenishment willingness. Special attention should be paid to first-line market signals from Keqiao Light Textile City, including grey fabric transactions, weaving operating rates, and fabric export orders, to verify the actual degree of downstream demand realization.