Why rayon fabric price hard to post strong growth?

Textile raw materials have been rising, especially after the state cotton reserves sales policy was confirmed last week. Cotton, PSF and VSF prices generally climbed up and cotton yarn, rayon yarn as well as polyester yarn gradually followed up. However, grey fabric market keeps quiet without strong upward momentum.

The state cotton reserves sales policy was announced on Jul 2, with a total planned selling volume of 600kt. ZCE cotton futures showed strong momentum subsequently and bulk commodities mostly went up, especially the resonance between spot and futures with fast price increase, like cotton and cotton yarn, PSF and polyester yarn, VSF and rayon yarn. Recently, the bulls take the wind and the price surge at the beginning of year seems to make a comeback. However, the actual sales fail to improve and the price lacks upward momentum.

Driven by rising VSF and rayon yarn prices since last weekend, the trading mood of rayon fabric market has warmed up slightly and weaving mills become eager to adjust up prices, but retrained by the traditional slack season, sales have not been reversed yet and the price is still hard to rise.

Some Shandong, Zhejiang, Guangdong and Shaanxi-based enterprises reflect that weaving mills still cut production or suspended operation, so the operating rate is generally low. The run rate of circular knitting machines has been increasing, which is around 50% in Foshan of Guangdong and over 60% in Zhejiang and Jiangsu. Weaving fabric output is still reducing and many rayon fabric mills have converted to cotton or polyester/rayon fabric. Many weaving mills in Gaomi of Shandong had been shut for long holidays and most of them just resumed operation at the beginning of Jul.

Raw material prices are rising recently and most participants are expected the resurgence of price hike at the beginning of year. Grey fabric sales have improved somehow with prices rising by 0.05-0.1yuan/meter on trial basis, but most weaving mills have not seen substantial improvement of sales or orders and funds remain tight, so prices change little and they are expected to consume stocks and keep price stability in the short run.