In mid-August, the domestic polyester staple fiber (PSF) industry witnessed a rare collective action—major producers jointly cut output to combat deteriorating processing margins. Over the previous month, squeezed between high feedstock costs and weak downstream demand, most enterprises slipped into losses. Whether these cuts can turn the tide depends not on supply but on the pace of terminal orders in September.
The Logic Behind Output Cuts: Survival Between High Costs and Weak Demand
In July, geopolitical tensions in the Middle East pushed up international crude oil, driving East China PSF spot prices to a peak of 7,675 yuan/ton. However, entering August, the geopolitical premium quickly faded, weakening feedstock support, while downstream orders failed to pick up as expected, compressing processing margins and widening losses.
Feedstock markets were not uniformly weak. PTA saw two major units delay restarts, and rainfall disrupted port loading in East China, pushing spot basis to nearly 300 yuan/ton, with August social inventories potentially falling to a 44-month low. MEG also remained strong due to Middle East tensions and strait navigation disruptions, cutting import arrivals; East China port inventories dropped to a 15-year low, with spot premiums reaching as high as 540 yuan/ton in early August. Low inventories provided temporary cost support for PSF, but with planned restarts of PTA and MEG units, this support may weaken.
Supply-Demand Mismatch: The Root of Losses and the Target of Cuts
The industry's real trouble lies in supply-demand imbalance. In July, PSF operating rates hit 70.36%, with ample spot supply, while downstream yarn mills held high finished goods inventories, purchasing only on a hand-to-mouth basis. Both domestic and export orders showed no substantial recovery, and new capacity is still planned for H2, adding long-term supply pressure.
Keqiao Textile City, a key fabric trading hub, saw gray fabric transactions contract in August. Weaving and trading merchants remained cautious, keeping operating rates low and purchasing on demand. PSF-related fabric sales were mostly small and scattered orders, with only a few export directional orders following up, limiting upstream price pass-through.
Output Cuts: Short-Term Support vs. Long-Term Game
On August 15, major producers jointly announced a self-rescue plan, focusing on strictly controlling supply increments, suspending some unit startups and restarts, and increasing output reduction. They also pledged to abandon vicious low-price competition. Leading enterprises in Jiangsu, Zhejiang, and Fujian all participated, covering mainstream direct-spun capacity. If cuts are effectively implemented, industry operating rates could fall from 70.36% to around 67%, reducing monthly supply by about 30,000 tons, providing a floor for prices.
In the short term, supply contraction, coupled with low inventories at some branded sources, will tighten spot circulation and help prevent deep price declines. For Keqiao Textile City, tighter raw materials will raise trading costs and limit fabric price cuts, but without clear order improvements, fabric price hikes face significant resistance.
Price Outlook: Oscillating Recovery, No Sustained Rally
Overall, from late August to early September, output cuts should stabilize and strengthen the market, gradually repairing processing margins. In mid-to-late September, the market will oscillate between weakening costs and demand recovery. The biggest risk is supply rebound after margin recovery—price rises may tempt producers to relax cuts, and deferred new capacity may come online, capping price and margin recovery.
Whether the September peak season materializes depends on signals from Keqiao Textile City, including gray fabric transactions, weaving operating rates, and export fabric orders. If terminal demand genuinely recovers and weaving mills shift from hand-to-mouth to active restocking, output cuts will have a multiplier effect; otherwise, supply-side contraction alone cannot sustain a strong rally.