China VFY market may perform better in 2022

VFY price showed a downward trend but then an uptrend in 2021. VFY demand had not returned to normal in the first quarter due to the COVID-19. Prices held steady but trades were thin. During the second and third quarter, end-user demand decreased sharply compared with past years, while both inventory and operating rate of VFY plants remained high. Although VFY companies started to actively control production later, the price still dropped under huge selling and capital pressure. In the fourth quarter, VFY companies driven by improving demand, production cut amid electricity rationing policy and hiking raw materials kept raising offers.

The volatility of VFY operating rate was greater than that of past years under huge capital pressure brought by high inventory. Although VFY sales kept weak in the first half of the year, few units were shut for maintenance in order to maintain continuous production, and VFY companies generally controlled output by adjusting the varieties of products. VFY plants started to adjust strategies by cutting or suspending production since mid-2021 and some of them were closed or shut for maintenance for 1-2 months. In the fourth quarter, the production cut continued due to power rationing. The operating rate of 60% hit a record low in the history.

VFY price fell and then went up in 2021. The inventory dropped and price almost recovered to pre-epidemic level with smaller pressure of suffering losses, laying a good foundation for 2022. The demand may further improve in 2022 and the operating rate is likely to increase with improving profits. The market is expected to be mainly stable when the supply and demand is largely balanced. The overall operation and performance will be better than that in 2021.