Rayon yarn: improving profits and waiting for peak season

Since the beginning of the year, the theoretical profit of rayon yarn for various technology has suffered significant losses. After the Chinese New Year, the situation started to improve. Currently, conventional varieties such as compact-spun, siro-spun and open-end yarn have all recovered to above the break-even point. However, ring-spun and vortex-spun yarn that accounts for nearly 70% of the rayon yarn market share, are still below the break-even point (although not far from it).

Since Jun, the decrease in yarn prices has been less than that in raw material prices. Yarn mills are reluctant to sell at low prices as they did in the first half of the year. Additionally, with the upcoming traditional peak season for textile products in Sep and Oct yarn mills are more inclined to gamble for the peak season, resulting in anticipated gradual improvement in profitability for yarn in Aug and Sep.

Compared to the profitability of pure polyester yarn and pure cotton yarn (both ring-spun yarn), rayon yarn performed relatively better, despite falling behind in the first half of the year. In the current market atmosphere, rayon yarn is still performing well. Although polyester yarn has seen destocking, inventory remains relatively high, while cotton yarn inventory continues to accumulate. Rayon yarn, on the other hand, has been maintained at a relatively stable level for about a month.

For rayon yarn, the focus for the future lies in two main points. Firstly, the fluctuation in VSF prices, which is expected to become clear in the coming week. With VSF inventory at major factories not being too high, the price fluctuations are expected to be moderate. Secondly, the stocking attitude of traders and downstream plants once the prices of VSF and rayon yarn become clear. Ultimately, the consumption capacity of the end-users will determine the market situation. Recent policy releases have been frequent, including the NDRC's introduction of "20 measures to boost consumption," which is expected to stimulate consumption once the specific implementation policies are in place.