Can lower inventory further bolster VFY price in H2? – ChinaTexnet.com
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Can lower inventory further bolster VFY price in H2?

2022-08-01 07:52:31 CCFGroup

VFY price of China kept rising in the first half of 2022, which was mainly driven by higher cost and orders, especially demand from export market. The inventory declined apparently when the supply was reducing, which further triggered the intention of price rise by VFY companies. At the same time, pulp and chemicals kept hiking and electricity price also went up, so VFY producers were still under pressure, but gross profit could sustain.

 

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As for downstream demand, VFY market was gradually closed for Chinese Lunar New Year holiday in Jan and downstream plants gradually suspended operation after building up stocks, which had not resumed until mid-Feb. However, the new wave of COVID-19 infections in some regions of China affected the production and transportation of downstream plants, coupled with capital issue. The demand in China local market was not strong, while there was healthy growth of exports since orders from Southeast Asia like India and Vietnam increased significantly with the resumption of work.

 

Leading VFY companies like Jilin Chemical Fiber and Xinxiang Chemical Fiber generally lowered operating rates in the first half of 2022 due to the COVID-19 epidemic and Winter Olympics, but the operation had resumed in the second quarter and selling pressure was alleviated owing to destocking. In the second half of year, VFY plants are expected to maintain healthy production activity. Moreover, the export volume is expected to perform well with faster resumption of work by downstream plants as well as better end-user demand from major consumer markets like India and Pakistan.

 

In conclusion, the inventory burden of VFY industry was alleviated notably and the price kept going up in the first half of 2022, laying a good foundation for the second half of year. Now the inventory of VFY has fallen to around 50 days and if the demand, especially the one from overseas market can keep relatively steady in the second half of year, VFY price may be supported and is still likely to rise further in peak season.

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