What to expect from China's viscose staple fiber market in 2026?

China's viscose staple fiber (VSF) market posted an overall trend of steady upward movement this year. Despite periodic minor swings driven by the Spring Festival holiday, seasonal shifts in downstream sectors, raw material volatility and inventory dynamics, the market demonstrated solid fundamental resilience with continuously rising prices. Supported by high operating rates and low inventory, overall industrial prosperity climbed steadily.

I. Step-wise price hikes and notable resilience

The market operated steadily at the start of the year, while trading activities were dampened by the Spring Festival break. Volume and price moved upward in tandem during Mar-Apr. Higher raw material costs, concentrated restocking among downstream buyers and output curbs to defend prices formed multiple bullish drivers pushing prices higher. Mainstream offers were at 14,000yuan/mt by late Apr, and market bullish sentiment was fully unleashed. In May, prices stayed firm at elevated levels and continued to edge up. Nevertheless, price transmission lagged for downstream products, purchasing sentiment turned cautious, coupled with disruptions from periodic plant maintenance, which slowed the pace of price gains.

Jun ushered in the traditional downstream consumption off-season, weighing on short-term market sentiment. Still, core fundamentals of low inventory and high pre-sales delivered strong underpinning, and prices rebounded and strengthened in mid-to-late Jun. Jul saw stable prices and smooth sales. Although profits narrowed for yarn mills and end-user orders softened, yarn mills kept stable operating rates with steady raw material consumption, keeping supply-demand balanced. The overall supply remained tight in Aug, and producers showed strong resolve to hold prices steady. While some bearish rumors circulated in end-user market, they exerted no material impact on market sentiment.

II. High operating rate and low inventory: sound industrial performance

China's domestic VSF sector has kept improving over the past three years, with capacity utilization hitting a ten-year high and markedly enhanced overall operational quality. Though the industry faced periodic tight supply of chemical raw materials, operating rates stayed elevated. Short-term fluctuations only occurred in isolated months due to plant turnarounds, with operating rates staying above 90% for most periods. Inventory performance stood out. Even after inventory build-up around the Spring Festival, inventories remained low, with average physical inventory below 10 days since the beginning of this year. This low-inventory setup constituted the core pillar sustaining market resilience.

III. 2026 outlook: favorable supply-demand balance with cautious-optimistic sentiment

1. High operating rate becomes norm, limited room for output growth

Driven by steady downstream rigid demand and improved profit expectations, Chinese VSF producers will maintain high operating willingness in 2026. No new capacity additions are scheduled, and output growth can only be achieved by lifting plant operating rates. Based on existing capacity structure and operating conditions, the industry operating rate is projected to stabilize at a high range of 91-92% in 2026.

2. Imports to rise moderately, exports to consolidate with lingering resilience

Robust demand and solid price absorption capacity in China's textile sector will underpin VSF import volumes, which are expected to see mild steady growth in 2026. The export picture is more complex. Chinese VSF boasts strong international competitiveness thanks to stable production technology, premium product quality and cost advantages. Rising export prices will boost manufacturers' export appetite, and rigid global processing demand will form solid bottom-side support for exports. However, export upside will be capped by headwinds including ocean freight volatility and substitution effects from lyocell fiber. Exports are forecast to move mostly sideways in 2026.

3. Positive supply-demand backdrop supports cautious-optimistic market outlook

External macro uncertainties will persist in 2026, yet internal supply-demand fundamentals of the VSF sector keep improving. No new capacity is set to come online, tightening supply rigidity. On the demand side, steady commissioning of downstream capacity will generate tangible new demand. Barring major macro bearish shocks and assuming stable industry operations, the supply-demand landscape will remain favorable, and the market will follow a generally cautious-optimistic trajectory.