In July, polyester staple fiber prices in East China hit 7,675 yuan per ton, driven by geopolitical risk premiums. After the premium faded in August, low PTA and MEG inventories became the new support, but industry operating rates remained high at 70.36%, downstream orders were limited, and processing fees were squeezed, widening losses. On August 15, major producers jointly announced output cuts to reverse the trend.
Feedstock Divergence and Cost Dynamics
PTA supply tightened as two major units delayed restarts, and rain disrupted port operations in East China, pushing spot basis to nearly 300 yuan per ton, with August social inventories expected to hit a 44-month low. MEG imports dropped sharply due to Middle East tensions and strait navigation issues, coupled with concentrated maintenance, pulling East China port inventories to a 15-year low, with spot premiums reaching 540 yuan per ton in early August. These low inventories provide tangible cost support, but restarts are planned, and feedstock support may weaken.
The contrast between feedstock strength and downstream weakness is stark. In July, PSF operating rates rose to 70.36%, with ample spot supply, while new capacity is planned for H2. Terminal textile orders saw limited growth, yarn mills held high finished goods inventories, and purchasing remained just-in-time. This supply-demand mismatch is the root cause of industry losses.
Output Cuts and Market Response
On August 15, major domestic PSF producers jointly announced self-discipline measures, focusing on controlling new capacity, postponing restarts of idle units, and increasing output reduction. Leading enterprises in Jiangsu, Zhejiang, and Fujian all participated, covering mainstream direct-spun capacity. If cuts are effective, operating rates could fall to around 67%, reducing monthly supply by about 30,000 tons, easing oversupply.
These are proactive adjustments, not forced shutdowns. Cuts will deepen in late August, with concentrated implementation and maintenance in September. For the Keqiao textile city and surrounding Xiaoshao weaving clusters, changes in feedstock supply will directly transmit to yarn trading, weaving, and fabric distribution. In the short term, supply contraction can prevent deep price drops, but fabric price increases face resistance due to weak orders.
Key Variables for the September Rally
The effectiveness of output cuts is uncertain. First, execution has flexibility; if prices rebound and processing margins recover, some enterprises may reduce cuts. Second, new capacity is only postponed, not canceled. More importantly, demand is the core constraint. Without improved downstream orders in September, supply-side contraction alone cannot sustain a rally.
Keqiao textile city's transaction activity is a key window. August is traditionally slow, with grey fabric transactions shrinking, weaving mills running at low rates, and merchants buying on a need basis. Whether the September peak season materializes depends on new and repeat order growth, and whether weaving mills shift from just-in-time to proactive stockpiling. If Keqiao transactions don't recover, the boost from upstream cuts will be limited.
Overall, from late August to early September, output cuts will support market stabilization and processing fee recovery; mid-to-late September will see a tug-of-war between weakening costs and demand recovery, with prices likely to oscillate upward. After price recovery, supply rebound risks remain, and the market may experience repeated fluctuations.