Rayon yarn weakens amid less-than-expected demand

As expected at the end of Jan, some rayon yarn mills have gradually lowered prices starting Mar. In fact, the decline in cotton yarn since early Mar and the obvious weakness in the trend of cotton and PSF futures roughly indicate that demand is lower than expected.

ZCE cotton futures

PSF futures

Currently, the cotton textile industry chain has a strong commonality, so the market situation of the cotton and PSF chain also has a predictive effect on VSF. Last Friday, a major VSF plant located in South China introduced new sales policy, and other plants recently have also clarified their sales prices. The trading prices have slightly fallen, and downstream buyers have shown some buying interest. As for VSF, the fundamentals are still good, with relatively abundant pre-sale volume.

However, the fundamentals of rayon yarn have begun to weaken, mainly due to a significant shortfall in demand. After the Spring Festival, yarn mills received very few orders, mainly focusing on digesting the pre-holiday orders. The sales of trader also remain slow. Some yarn mills with fewer orders have begun to accumulate inventory. In addition, the relatively high quotations that yarn mills have always sustained also begin to fall (including the popular high-count compact siro-spun yarn last year), with a range of 100-600yuan/mt.

If the weak demand for rayon yarn continues for 1-2 weeks, the inventory of some yarn mills is expected to rise to a high level, which may trigger a wave of price cuts. Under the relatively strong performance of VSF, yarn mills will be squeezed, and the profitability of rayon yarn will fall again. The future market still depend on the demand.