VSF: which is more influenced by dual control, supply or demand?

The dual control of total energy consumption and energy intensity is coming fiercely, especially in Jiangsu and there is also influence in other provinces. To VSF, the impact is on the entire industry chain, then which one has greater influence, supply or demand?

The conclusion is that there is bigger direct impact on demand than on supply. The reasons are listed as below:

1. Spinners and textile enterprises are usually totally shut down during electricity rationing due to small scale, while VSF plants shut part of lines.

2. The impact of dual control is prominent in Jiangsu province that is the largest VSF consumption area, taking up more than 25% of China’s total, but Jiangsu’s VSF capacity just occupies 17% nationwide. Funing Aoyang that has been shut down is not affected by dual control.

3. One of the common reference indicators for dual control is the year-on-year electricity consumption. As VSF plants maintain stable production in 2020, the energy consumption in 2021 can keep flat. However, due to the impact of the COVID-19 in 2020, energy consumption of spinners is lower and the consumption in 2021 will be much higher year-on-year, so the pressure of energy consumption reduction is bigger than that of VSF companies.

But it is noteworthy that dual control not only influences viscose industry chain, but also affects various industrial fields. Besides the impact on supply and demand, dual control will cause hiking price of chemicals used to produce VSF, like caustic soda. Therefore, dual control cannot be simply regarded as negative factor when judging the price trend.