In mid-August, the domestic polyester staple fiber (PSF) industry witnessed a rare collective action: major producers simultaneously announced coordinated production cuts to offset expanding losses. This move stems from a supply-demand mismatch where processing margins are squeezed to historical lows while operating rates remain as high as 70.36%. The key to whether production cuts can support prices lies not in the supply side itself, but in whether terminal orders materialize in September—this is a supply contraction bet on the Golden September.
Cost and Demand Squeeze
Current cost support for PSF shows a divergent but firm pattern. For PTA, the restart of two core units was delayed, and rainfall in East China disrupted port loading, pushing spot basis close to 300 yuan/ton, with August social inventories expected to hit a 44-month low. MEG is similarly tight: Middle East tensions reduced imports, combined with domestic maintenance, dragged East China port inventories to a 15-year low, with spot premiums reaching as high as 540 yuan/ton in early August. Low inventories provide tangible cost support for PSF.
However, demand remains weak. In July, the domestic PSF industry operating rate reached as high as 70.36%, with ample spot supply, while terminal textile orders saw limited growth. Yarn mills' finished goods inventories stayed high, and raw material purchases remained just-in-time. As a core textile trading hub, Keqiao Light Textile City saw fabric transactions shrink in August, with weaving enterprises operating at low rates and merchants buying on demand. PSF-related fabrics moved in small lots, and upstream price hikes could not pass through to downstream. With costs rising and demand flat, processing margins were squeezed, and industry losses expanded.
Short-Term Support and Long-Term Game of Production Cuts
On August 15, major domestic PSF producers jointly launched a self-rescue plan focused on controlling supply increments, increasing production cuts, and abandoning vicious low-price competition. Leading enterprises in core production areas like Jiangsu, Zhejiang, and Fujian all participated, covering mainstream direct-spinning capacity. The industry has officially entered a production-cut-to-protect-profit cycle. In the short term, if cuts are effectively implemented, the industry operating rate could fall to around 67%, reducing monthly supply by about 30,000 tons, easing spot oversupply and preventing deep price declines.
However, the effectiveness of production cuts faces uncertainties. First, execution is flexible—once prices rebound and margins recover, cash-strapped enterprises may reduce cut levels. Second, new capacity is only delayed, not canceled; once the industry turns profitable, supply pressure will resurface. Most critically, demand is the core constraint on upward momentum. If downstream orders do not improve in September, supply contraction alone cannot sustain a rally. Keqiao Light Textile City's transaction sentiment will be a key window to observe Golden September demand realization.
Price Trajectory and Industrial Transmission
Based on comprehensive industry chain information, coordinated production cuts can provide clear bottom support for PSF prices. From late August to early September, cut implementation will stabilize and strengthen the market, with processing margins gradually recovering. In mid-to-late September, the market will oscillate between weakening costs (PTA and MEG unit restarts) and demand recovery expectations, likely maintaining a volatile upward trend rather than a unilateral rally. For the Keqiao and surrounding Xiaoshao weaving clusters, tighter raw material supply will raise traders' procurement costs, limiting fabric price reduction space and easing low-price competition to some extent. However, without clear order improvements, fabric price hikes face significant resistance.
Market participants should closely track the actual implementation of major producers' cuts, upstream and downstream unit restart progress, as well as key indicators like yarn mill operating rates, terminal orders, and downstream restocking willingness. First-line signals from Keqiao Light Textile City—fabric transactions, weaving operating rates, and fabric export orders—will directly verify the realization of downstream demand.