A good start can be expected for rayon market in 2023?

With one-week countdown to the Spring Festival, the operating rate of rayon yarn and fabric mills has been gradually close to 30%. According to feedback, the market will be basically closed by this weekend. Except for rayon yarn mills in Xinjiang that will start the holiday since Chinese Lunar New Year Eve, the mills in Fujian suspended operation unexpected early on Dec 10 (lunar calendar). The holiday in Zhejiang was slightly earlier compared with prior years, while that in Shandong, Zhejiang and other regions is almost the same as it was in the past years.

There are market and operational factors, as well as the impact of the epidemic. Fujian and Zhejiang were the least impacted by the lockdown policy throughout the year. Only the concentrated infection after the relaxing of the epidemic prevention policy at the end of the year had a certain impact on production, and the peak period of infection was relatively slower than other regions, which was close to New Year's Day and the Spring Festival. In addition, due to the relatively stable production, although Chinse yarn mills have reduced production this year, the sales pressure of rayon yarn mills in Fujian and Zhejiang is greater. Fortunately, there was a wave of large-scale sales in Zhejiang at the end of the year to ease the inventory pressure. However, Fujian-based mills are suffering serious losses.

Going further north, Jiangsu, Shandong and other regions gradually increased their lockdown time in 2022, and their output decreased significantly. By the end of the year, the sales pressure was not obvious, and some varieties may even saw tight supply in some areas. The peak period of infection was concentrated in the first half of Dec. When there was still a month before the Spring Festival, the spinners generally chose to speed up the production. Xinjiang was locked down for the longest time in the second half of the year, and gradually resumed operation at the end of the year. Moreover, there is no regional specificity of the Spring Festival tradition, so the current production status is similar to that of previous years.

In addition, the production enthusiasm and expectations of enterprises have generally undergone obvious changes. The relaxing of the epidemic control policy has led to a sharp recovery in market confidence, which is mainly reflected in the stocking volume of traders at the end of the year. Rayon yarn mills received more orders, and the inventory pressure eased. With the confidence and funds to keep producing, building up stocks and purchasing raw materials, VSF also unexpectedly did not fall sharply, providing support for downstream products.

Although the current market transactions are mainly based on expectations and emotions, it is still unknown whether the transferred inventory will be digested in the coming year, but with the cooperation of several links, the situation has changed, and a good start can still be expected.