Downgraded management of COVID-19 beneficial to China VFY market?

VFY market generally performed well in 2022 when the price was gradually climbing up coupled with increasing sales. There was faster price rise in the first half of the year, and the price began to stabilize in the second half of the year with slower sales.

In the first quarter, the market was almost closed during the Spring Festival. After the holiday, the new wave of COVID-19 cases in Northeast China and the epidemic control policy in other areas of China weighed on production of enterprises, circulation of staffs, transportation and freight cost. In external environment, the price of energy surged due to the Russia-Ukraine war and consumption outside China was restrained by the enhancing inflation. In the second quarter, the trading volume of VFY kept hitting new highs as orders from Southeast Asia increased significantly with the relaxing of pandemic control policy. There was weaker demand in China local market in the third quarter because of the slack season, as well as bad weather and power rationing, but exports continued to bolster VFY market. There was falling export and production cut by Chinese companies in the fourth quarter, but the performance was not so bad.

China totally exported 93.6kt of VFY in the first eleven months of 2022, a year-on-year growth of 10%. Although there is uncertainty in the fluctuation of economic environment in 2023, the consumption of VFY is expected to warm up with the relaxing of pandemic control policy, which is likely to be obvious in the second half of the year, especially in the fourth quarter.

The rising price, improving profit and easing inventory burden of VFY in 2022 has laid a good foundation for next year. The demand is likely to warm up and the price is expected to hold steady, but the influence of economic environment volatility and new capacities is noteworthy.