Rayon grey fabric: why weaker expectation for peak season?

After the Chinese Lunar New Year, the performance of textile market was not as good as expected. Recently, the trading atmosphere in rayon grey fabric market has been dull, with overall concerns rising and fewer new orders in weaving mills. This is mainly due to the previous orders being fulfilled, and expectations for the peak season have significantly weakened. Why is this happening?

Due to the anticipation of a better post-holiday outlook, the inventory at various links of the industry chain before the Spring Festival was generally excessive. The feedstock inventory at yarn mills, yarn inventory at fabric mills, and fabric inventory at printing & dyeing mills and apparel plants all exceeded normal consumption of the orders.

Based on incomplete statistics, the factory's inventory before the Chinese New Year can range from 15-20 days to over a month and a half. This means that after the holiday, there is no need for large-scale purchases for about one month. Furthermore, the inventory of the traders is relatively high. What's more, the practice of "buying low before the Chinese Lunar New Year" has evolved into "selling high after the Lunar New Year." As a result, after the Spring Festival, the focus across the various aspects of the supply chain is on prioritizing the consumption of the inventory carried over from the previous year, leading to an overall low enthusiasm for procurement.

Due to strong pre-holiday demand, many participants believed that the momentum would continue after the Lunar New Year, leading to rapid recovery in the operating rate of yarn and fabric mill. Most plants resumed operation as early as the third to fifth day of the first lunar month, and the majority were operating by the eighth to tenth day, with operation returning to normal after the Lantern Festival (Feb 24). Currently, the operating rate of yarn and fabric mills is stable at around 80-90%, and that of dyeing and printing mills in Jiangsu and Zhejiang provinces has also reached nearly 80%. Therefore, while end-user demand is recovering slowly, recent rapid recovery in supply, along with excessive circulation of goods, has led to a situation of strong supply and weak demand.

In conclusion, due to excessive inventory at various links before the Spring Festival, coupled with lower-than-normal purchasing intentions after the holiday and slow recovery in end-user demand, the good start in the textile market seen last year is short-lived. Particularly concerning is the current early fading of demand, leading to increased market caution and concern, and suppressed enthusiasm for buying and selling. Yarn and fabric prices have partially dipped, with an increase in negotiation for discounts, marking a resurgence of the "strong supply, weak demand" situation.