Why rayon not welcomed on the market?

Market participants are currently expecting unknown orders, but the question is that rayon is unwelcomed on the market, why?

Firstly, there is great fluctuation of fiber price. From the continued decline during 2019-2020 to the hike during 2020-2021, the volatility around 7,000yuan/mt is irritative to each link of the industry and losses caused by the huge price change also results in risk aversion.

Compare PSF with the largest fluctuation around 3,000yuan/mt, and cotton that is almost stable to firm in spite of a price gap of over 4,000yuan/mt, VSF without futures whose losses are caused by price volatility have to be endured by downstream companies. The impact accordingly on the profits is a major factor that makes it difficult for rayon products to be favored by customers from yarn, fabric to end-user market.

In addition, orders from end-user market are not recovering as quickly as expected due to the factors such as exchange rate, repeated pandemic, shipping, as well as fluctuations in raw materials. Cotton and PSF mainly depended on orders in China local market, while rayon products that highly rely on exports are greatly affected. The export of cotton fabric accounts for less than 5% of the output, while about 30% of rayon fabric is directly exported with major destinations of Southeast Asia like Thailand, Africa and Europe where the situation of COVID-19 and economy is not optimistic.

At present, the spot profit of pure spun rayon yarn is negative, and the actual profit is around zero, while other varieties generally gain the profit over 500yuan/mt. Even in the slack season, the profit market is a major driving force for yarn mills to maintain production. However, the original pure spun rayon yarn mills who have been disappointed are switching to blended yarn with faster speed.

The market focus has not changed and we still have to wait for demand to warm up. At the same time, in order to cater to market demand and survive, the companies also need to improve flexibility, expand their views from raw materials to finished products, and master more options and initiatives.