Rayon grey fabric mills face larger sales ratio burden

Recently, driven by higher feedstock costs and affected by lower operating rate, viscose plants were willing to quote up and the offer rose by nearly 1,000yuan/mt. Boosted by this, the prices of vortex-spun and open-end rayon yarns also inched up. However, downstream weavers were reluctant to cover at the higher prices and rayon grey fabric prices were weak, so sales ratio burden of the fabric mills expanded.

1.Feedstock is hard to fall while rayon grey fabric is hard to rise

Operating rate of the VSF plants around Sweeping Tomb Festival holidays fell to less than 60% in sympathy with the epidemic and environmental protection, a new low for the year. In the case of supply contraction and loss reduction, the VSF prices of Tangshan Sanyou and Shandong Yamei rose to 14,500yuan/mt after the Sweeping Tomb Festival holidays, and then Sateri followed up. Mainstream VSF price now prevails at 13,900-14,500yuan/mt. After the Sweeping Tomb Festival holidays, vortex-spun and open-end rayon yarns prices moved up by 100-300yuan/mt, and vortex-spun rayon yarn mills in Wujiang witnessed better foreign orders and higher sales and prices. However, the rise in the feedstocks prices has not led to a pick-up in end-users demand, the price of rayon grey fabric was difficult to rise, the sales ratio burden increases, and more weavers cut or halted production.

2. Under dual pressures, more weavers cut or halted production

Recently, under the influence of disturbing factors such as the Fed's interest rate increase and the conflict between Russia and Ukraine, market players took a wait-and-see approach and customers' willingness to purchase was weak. In addition, as the pandemic has circulated since mid-March, epidemic prevention and control in China have escalated, which limited the logistics of many fabric mills, so freight has risen sharply, and trading in the rayon grey fabric market has been bleak recently. More weavers in Shandong Gaomi, Nantong, Fujian, Quanzhou and Guangdong Foshan cut or halted output. Operating rate was mainly 30%-60%, and some small and medium-sized weavers had a holiday of about 7 days during the Sweeping Tomb Festival holidays. Recently, the O/R of printing and dyeing mills in Jiangsu and Zhejiang has dropped to about 60%, with fewer orders and short delivery time, about 5-7 days.

From Mar 1st to Apr 10th, rayon grey fabric turnover in China Textile City reached 7.87 million meters, down over 50% year-on-year. The trading in 2022 was significantly worse than last year, much weaker than the peak season of previous years.

In conclusion, affected by many factors, viscose price has risen and rayon yarn price has been stable to slightly higher recently. However, higher feedstock price led to a contraction in downstream demand, poor sales in the fabric mills, larger sales ratio pressure, and the rayon grey fabric prices were still difficult to rise, and more fabric mills cut or halted output around the Sweeping Tomb Festival holidays. It is expected that the weavers will still plan to reduce production and take May Day holidays. Therefore, the upstream and downstream industrial chain enterprises still need to sacrifice some profit to ensure sales.