In July, polyester staple fiber (PSF) prices surged to a high of 7,675 yuan/ton in East China due to geopolitical tensions, but gains were quickly erased in August as processing margins were squeezed and losses widened. On August 15, major producers jointly announced production cuts to support prices. The effectiveness of this self-rescue depends on cost support sustainability, execution rigidity, and real terminal demand.
Cost Divergence and Supply Contraction
Feedstock markets show a divergent but firm pattern. PTA spot basis approached 300 yuan/ton as two core units delayed restart and rainfall disrupted port loading, with August inventories expected to hit a 44-month low. Ethylene glycol also strengthened, with East China port inventories at a 15-year low and spot premiums reaching 540 yuan/ton in early August, driven by Middle East tensions and reduced imports. However, maintenance turnarounds are scheduled to restart, posing a risk to cost support.
On the supply side, industry operating rates rose to 70.36% in July, indicating ample supply, with new capacity planned for the second half. The coordinated cuts cover leading producers in Jiangsu, Zhejiang, and Fujian, with deeper reductions expected in late August and full implementation in September. Industry operating rates may fall to around 67%, reducing monthly supply by approximately 30,000 tons.
Weak Demand and Transmission Barriers
Downstream demand remains weak, with limited new orders, high yarn inventory, and just-in-time purchasing. At Keqiao Textile City, fabric transactions contracted in August, weaving mills operated at low rates, and merchants bought on a need-basis. PSF-based fabric sales were mostly small and scattered, with only a few export orders. Upstream price increases are difficult to pass through to fabric terminals, as intermediate links absorb costs.
This implies that even if supply cuts support prices, upside is limited without 'Golden September' order growth. Keqiao's transaction activity serves as a key window to gauge demand realization.
Effectiveness and Market Game
In the short term, cuts combined with high feedstock basis may allow processing margins to recover, improving losses. However, medium-term uncertainties persist: execution has elasticity, new capacity is deferred not canceled, and demand remains the core constraint. Price forecasts suggest stabilization and strengthening from late August to early September, followed by oscillation in mid-to-late September as cost weakness and demand recovery compete. The biggest risk is supply rebound after profit recovery, preventing a sustained rally.