VSF market back to the year of 2014?

The stability of VSF has lasted for about half a year since the end of 2022. Looking at the historical records, there was only similar situation in 2014. Since the supply of VSF became tight in 2015, the market has been greatly up and down for eight years. It is common to build up excessive stocks at low price, so that the market seems to forget that there was a long period of stability.

During 2014, rayon yarn price was also near the break-even line. The inventory pressure was acceptable and the supply was not tight. From April to the end of the year, the raw materials were purchased normally, and VSF maintained a relative balance between supply and demand by relying on news about maintenance of units, production reduction and shutdown, setting a stable record of around 12,000yuan/mt for about seven months. Now the capacity of VSF is 1.5 times of that in 2014. The number of upstream and downstream enterprises, product structure and expectations have changed a lot, but the supply and demand is still the most critical of various influencing factors.

The change in the supply side is the main reason for this round of stability. Unlike the price war in which sales were prioritized in the past, the enthusiasm for maintenance by VSF plants has increased significantly compared with previous years, especially at the end of 2022 and in Apr this year when the news of maintenance by large-scale plants exerted bigger impact on market expectations and trends at critical time points. Although the capacity base number remains unchanged, the uncertainty of spot supply has increased, and the mentality of spinning mills has gradually changed from waiting for low prices to stable restocking, and there are even fears of rising prices. At the same time, the support from demand is not so optimistic. Yarns and fabrics that are hardly profitable witness mediocre sales and the price is in a dilemma, which restricts the market from being overheated or too aggressive.

Under this situation, VSF enterprises are undoubtedly the ones that earn the most by reducing losses greatly. Of course, downstream market performs stronger than that in 2014. In the short term, VSF is still supported by low spot inventory and monthly pre-sale orders, but the further price rise is restrained by spinning and fabric mills that already have loss-making pressure. There is similar situation for rayon yarn. The variable later is whether this patter will be broken by the performance of cotton or out-of-season orders.