China lyocell fiber market review in H1 2026

Chinese lyocell fiber market in the first half of 2026 posted an overall trend of rising first and falling back after hitting highs. From Jan to May, driven by robust downstream demand, substitution effect of chemical fibers and favorable export performance, the market maintained a strong upward trajectory with steady price hikes and tight supply-demand balance. In Jun, seasonal demand faded away rapidly, market sentiment cooled down sharply, and prices entered a sluggish and weak consolidation phase. Overall, the industry prosperity improved markedly year-on-year. Its production & sales volume, export volume and profitability outperformed most textile fiber varieties.

Q1: Steady recovery and upward momentum

In Jan, lyocell market bottomed out and rebounded. Major producers launched bulk order signing after the New Year's Day holiday, while small and medium-sized mills rolled out promotional offers. Improved orders for downstream finished goods boosted purchasing appetite, manufacturers continuously destocked inventories, and prices stabilized and rebounded by the month-end.

In Feb, the positive momentum continued with sufficient pre-sold orders and smooth deliveries, pushing up quotations steadily. During the Spring Festival, major downstream production bases took short holidays, export orders were fulfilled normally with minimal inventory accumulation, resulting in limited post-holiday market pressure. Leading manufacturers took the lead in raising prices by 200yuan/mt.

In Mar, sustained recovery in downstream demand, coupled with incremental substitution demand from synthetic fibers, fueled surging trading volume and kept the market on a steady upward track.

Q2: Correction after price surge

Apr witnessed a strong market performance. Expanding downstream application scenarios generated notable demand growth in traditional sectors such as knitting. Coupled with demand diversion of other bulk fibers, lyocell supply tightened amid widening supply gaps. In late Apr, widespread holding-back-for-sale sentiment prevailed, many suppliers suspended offerings, traders followed the uptrend with premium pricing, and higher offers exceeded 14,500yuan/mt.

May remained in a supply-shortage state with tight spot goods. In early May, some downstream processors cut production orders due to raw material shortages, leading to substantial spot premiums and a peak market price of 15,000yuan/mt. In late May, finishing orders for spring-summer end-products wound down gradually, the buying frenzy subsided and spot premiums narrowed.

Market sentiment plunged in Jun, sending prices into a weak stalemate. Downstream players held adequate early-stage inventories and focused on stock digestion, while lackluster new end-user market orders suppressed purchasing willingness. Early Jun prices received mild support from backlog orders and retreated below 14,500yuan/mt on thin transactions. Further price weakening occurred in late Jun, bargaining space expanded greatly, and the bearish trend was confirmed.

Supply & demand analysis

Lyocell industry operated at high capacity utilization in H1 2026, with operating rates persistently staying at a high range of 80-89%. Demand far exceeded expectations. Demand for compact siro-spun yarns first picked up in Dec 2025, followed by full-scale trading volume expansion starting early 2026. Geopolitical conflicts in Mar drove demand migration from synthetic fibers to lyocell, further tightening supply. The market fully entered an undersupplied state from Apr to May, with downstream buyers actively bidding higher to secure goods. Year-on-year growth of downstream demand exceeded 50% in H1 of the year, and the industrial chain delivered better profit margins than most textile products, sustaining strong end-user purchasing motivation. Moreover, capacity continued to expand. Newly added capacities came on stream orderly within the year, and existing lines broke through output bottlenecks via technical revamps. The annual capacity is projected to reach around 1.15 million tons by year-end.

Import & export performance

Overseas demand served as one of the core growth drivers for the industry. According to customs statistics under HS Code 55049000 (it could roughly reflect the import and export trends of lyocell fiber), the cumulative exports totaled 86,433 tons in H1 2026, surging 44.76% year-on-year. Imports reached 40,568 tons during the same period, down 29.26% year-on-year, reflecting rising domestic self-sufficiency rate and import substitution effect.

Conclusion

To sum up, given the H1 2026 lyocell market trajectory of steady Q1 recovery and Q2 post-surge pullback, together with the fundamental backdrop of expanding supply-demand scale and booming exports, the industry is currently in a cycle featuring capacity expansion, demand upgrading and structural optimization. Both supply and demand will expand throughout the year, though there are uncertainties in the growth rates.