Will resurgence of COVID-19 exert great impact on VSF industry?

The resurgence of COVID-19 cases in most areas of China after the Chinese Lunar New Year has exerted impact on various industries, including viscose fiber. At present, VSF, VFY and lyocell capacity of China totals 5.35 million tons/yr, which is distributed in 11 provinces (cities), of which only Hubei, Xinjiang and Guangxi are survived from the epidemic, accounting for 20.5% of China's total capacity.

*Note: orange for VSF capacity and blue for new COVID-19 cases on Mar 21, 2022

Among the top five main producing areas-Hebei, Xinjiang, Jiangsu, Jiangxi and Shandong, the number of new cases in a single day is all below 30, and there is a reduction of 3-7 percentage points in VSF and VFY operating rate, but there is more impact on the transportation, especially trans-provincial transportation. It is reflected that most plants is now based on intra-provincial and short-distance delivery.

Moreover, Shandong, Jiangsu, Zhejiang, Fujian and Guangdong are major production and consumption areas of yarn and fabric. Downstream plants still have feedstock inventory, but some of them also witness tighter supply. At the same time, destocking in end-user market is unsatisfactory after the Chinese Lunar New Year as both offline and online sales has been affected and new orders were fewer than prior years, so stocks start to be piled up in some yarn and fabric mills who are waiting for warm weather and the end of epidemic.