Could peak season worth expecting for rayon market?

Rayon industry has been improving somewhat as the prevailing price of medium-grade VSF has recovered from 12,400yuan/mt to almost 13,000yuan/mt and rayon yarn price is stable to stronger, especially rising offers of vortex-spun and open-end yarn. Rayon fabric sales have also turned better.

Regarding raw materials of rayon industry, VSF plants gradually raised offers amid tight delivery of the goods and trading price kept firmer. The producers were not eager to expand pre-sale. Major companies even limited the order volume, and there are not sufficient goods available by traders. However, the spinners are still actively building up stocks, and in this case, the physical inventory of VSF plants keeps falling, which has dropped to 2-year low. Considering the traditionally peak season in Sep, the price of VSF is expected to rise steadily.

It can be observed that the inventory of rayon yarn is lower than the comparable 2022 level, indicating a destocking trend contrary to the rapid accumulation of inventory seen last year. Currently, it is in a destocking phase, and stocking activities both at home and abroad seem to have started recently.

With the approaching peak season for textiles, prices of yarns are easier to rise than to drop with partially tighter supply, and there have been an increase in inquiries in grey fabric market, coupled with improving sales. The operating rate of weaving mills has also climbed up. It is reflected that many weaving mills in Shandong, Jiangsu and Guangdong were shut for holidays during Jun-Jul affected by the off-season and high temperature, but the run rate has been gradually picked up when the market is warming up recently. Although there is no significant improvement in orders for downstream dyeing and printing mills, with the upcoming launch of autumn and winter clothing and an increase in sample orders, the overall operating rate has been around 70%.

In conclusion, driven by seasonal demand and stocking in advance, rayon yarn market activity is passable with minor price rise, and rayon fabric market is preparing for the peak season with sales partially better than before. The traditional "golden September and silver October" may be affected by the foreign trade this year, but the market is still expecting the arrival of peak season.