VSF still inferior to cotton amid price spread of 10,000yuan/mt?

The price gap between cotton and VSF has hit a record high of 10,200yuan/mt and some spinners have increased the proportion of VSF in the production, but according to sample survey, the preference to VSF by those yarn mills that can flexibly shift between cotton and rayon yarn does not seem to sustain or keep increasing.

Cotton

Although the price is high, the support from cost is even stronger. In addition, there is impact of weather and trade on supply-demand relationship and market expectation. The enterprises show higher recognition of stronger cotton driven by tighter supply by witnessing price rise for one year. Although there are worries over downward risk brought by higher price, sharp decline of price is not expected to emerge.

Spinners increased the proportion of VSF not only because of high price and risk of cotton, but also the difficulty in cotton yarn price increase, so the adjustment was caused by heavy losses. However, most enterprises are expecting the peak season of spring and summer in 2022. If cotton is strong enough and cotton yarn is pushed up, then the spinners will be willing to produce cotton yarn by reducing losses.

VSF

VSF capacity expansion of China is slowing down in recent years, but the operation of existing producers is generally stable. Compared with demand of improving flexibility, suppliers is hard to keep firmer attitude in pricing. Coupled with the fluctuation of production cost, the upward momentum of VSF is weaker than that of cotton. In recent years, it is common to see more sales at low price, but the trading volume is limited when the price is low. Spinners who produce various varieties of yarn do not usually consume steady and a large amount of VSF, so they show less enthusiasm when VSF price drops.

In conclusion, if cotton-VSF price spread can remain high, VSF will be an attractive option to cotton yarn mills even in order to keep running the units. The acceptance for VSF by downstream and end-users may gradually improve after getting used to the situation.