Off-season volatility in cellulose: cause for alarm?

Historical data shows that since 2020, rayon yarn mills have avoided steep off-season run rate declines in most years, except for a sharp drop in 2022 stemming from external factors.

The period around Jul has traditionally marked the off-season for cellulose downstream sectors. For one thing, high summer temperatures raise operational hurdles for textile enterprises, prompting some players to slash operating rates. For another, the transition between spring/summer and autumn/winter order cycles triggers a temporary pullback in downstream orders.

The apparel industry's growing adoption of small-batch and quick-response production in recent years has narrowed the historic gap between peak and off-season demand, yet seasonal swings remain tangible.

Should market participants grow apprehensive over the impending off-season? We suggest that keep a measured eye on developments and no need for undue alarm. Reasons are outlined as follows:

Ongoing industrial upgrading across the textile sector has equipped production workshops with advanced temperature control systems and highly automated production lines, boosting resilience against high temperatures. Any summer fluctuations in plant operating rates are set to remain muted. Historical data shows that since 2020, rayon yarn mills have avoided steep off-season run rate declines in most years, except for a sharp drop in 2022 stemming from external factors. Notably, mill operating rates edged up slightly in Jun-Jul of 2024 and 2025, laying the groundwork for robust market performance of VSF after Aug in those two years.

Rayon yarn capacity expansion has sustained momentum in recent years, with vortex spinning installations seeing particularly rapid growth. Over the 12-month window from Apr 2025 to Mar 2026, China imported 1,078 sets of vortex spinning equipment, driving an incremental fiber consumption (all fiber varieties included) exceeding 500kt. Vortex spinning machine installations will keep expanding rapidly going forward, while the elimination of outdated lines proceeds at a sluggish pace.

Cotton and PSF prices have seen volatility recently, posting larger price hikes than VSF alongside inferior price stability. Despite a recent slowdown in rayon yarn orders, producers of this yarn continue to boast superior profit margins and smoother circulation versus alternative yarn grades, ruling out any large-scale raw material substitution away from VSF for the time being.

The so-called off-season is a relative concept. Not all textile products face slack demand during Jun-Aug, with certain varieties such as core-spun yarn entering concentrated processing cycles. Elevated polyester and nylon prices previously deterred textile mills from ramping up core-spun yarn output, yet approaching peak consumption seasons are expected to spur production expansion at some mills and partially lift the demand.

We do not definitely expect the market to stage a robust performance in Jun-Jul. The off-season backdrop coupled with relatively high fiber prices has dampened downstream risk appetite. Instead of advance procurement seen earlier, buyers are shifting toward delayed procurement, which could create a lull in new order signing.

Under such circumstances, volatility cannot be ruled out if suppliers opt to sell more fibers at higher prices.

This article does not intend to judge the merits of individual trading practices. It merely offers an observational framework for ongoing market shifts. Enterprises shall formulate purchase and sales strategies prudently based on their own operational status and risk tolerance.