VSF: rising price like an arrow on the bowstring

VSF companies at the beginning of this year were complacent and ready to regain lost ground by pushing up prices significantly. VSF price in the first two months rose by around 4,000yuan/mt, with the higher hitting 16,000yuan/mt. However, further spread of the COVID-19 in the second quarter like a basin of cold water extinguished the small flame that was just ignited by VSF.

VSF started to keep falling subsequently by around 3,000yuan/mt from 15,300-15,800yuan/mt to 12,300-12,800yuan/mt and sales continued to increase, while inventory kept going up. The price tool did not seem to work properly. Even if VSF plants signed a considerable number of orders by slashing offers, the slow implementation can hardly reduce VSF inventory.

The performance of other fibers is remarkable in the meantime. Cotton products driven by the new national trend are vibrant on the market, and the profit is relatively satisfactory. Polyester products whose price declined fast in Mar were favored by customers by virtue of low price and the market recently climbed up underpinned by crude oil.

The embarrassment of VSF has become more prominent recently as the price gap with cotton has widened to almost 4,000yuan/mt and yarn mills gradually start to suffer losses. The lower price of vortex-spun R30S had touched 15,600yuan/mt, while processing cost is just above 3,000yuan/mt, leading to losses and fast reduction of pure spun rayon yarn machines. The supply of vortex-spun rayon yarn supply starts to decrease accordingly and yarn mills whose pressure has been alleviated began to raise offers last week.

Positive feedback starts to emerge with rising offers of yarn mills and it was also heard last Saturday that Sateri planned to quote VSF up to 13,000yuan/mt. It is supposed to be normal price adjustment according to common sense, while there is strong feedback on the market as traders rushed to purchase medium-grade VSF below 12,500yuan/mt and some VSF plants saw the sales ratio at 300%. The trading mood has been extending Monday and some traders outside the market are also considering about building up stocks.

To VSF plants, since the price tool fails to work and price reduction cannot boost sales, trying to adjust up prices is just like an arrow on the bowstring, but whether VSF market could stop falling still depends on capital and downstream demand. Now mid-year has just passed, some banks have gained more quotas and funds of real estate market have tightened, but whether the capital will enter textile industry is noteworthy. The overseas epidemic situation gradually stabilizes. Although Jul is still earlier compared with the peak season of export orders, some companies may have layout in advance.

This round of viscose staple fiber has increased, and downstream positions have been repurchased in stages. Whether the market stops falling and whether the market can reverse. An observation period of 1-2 weeks may also be required.

VSF offers are picked up and downstream plants replenish stocks again, but whether the price could stop falling and whether the market could be reversed still needs further observation for 1-2 weeks.