Will fast supply growth of lyocell weigh on price?

Chinese lyocell prices generally showed a downward trend in 2024, except for an increase at the beginning of the year. In the first quarter, the prices continued to be mixed. Some plants tried to raise offers in January when orders were signed well, and market prices advanced from 13,700yuan/mt to 14,000yuan/mt or even higher. However, lyocell plants had higher inventory after the Spring Festival, and the operating rate further advanced in Mar. Coupled with massive fibers and yarns held by traders as well as varying demand from different areas, the lyocell market was relatively mixed with stronger competition. Under such circumstances, some large-scale plants adopted flexible sales strategies by selling fibers at different prices to various customers, with a huge spread for the same specification and brand of fibers.

The market further weakened in the second quarter, and continued the downward trend in the third quarter. In Sep, the manufacturers attempted to raise prices and achieved short-term success, but due to the downstream demand's sensitivity to price and the competition among suppliers, by the end of Sep the market price still only managed to stay at 12,800-13,100yuan/mt for scattered orders. The market largely stabilized with narrow fluctuations in the fourth quarter.

In 2025, both supply and demand for lyocell fiber are expected to grow. Downstream demand remains uncertain, depending on technological breakthroughs in some downstream sectors, and the risk of supply exceeding demand still exists.

Currently, China remains the most competitive country in the global textile industry. For fibers like lyocell, which require a certain level of supply chain processing, the importance of the Chinese market is unquestionable. Regarding the import and export of lyocell, the main reference is the H.S. code: 55049000, defined as "artificial staple fibers (excl. viscose)." Observations indicate that this category mainly consists of lyocell fibers, although it cannot completely rule out the presence of non-lyocell fibers. In 2024, the import of fibers under this code amounts to 112.8kt, with a year-on-year increase of 20%. The export totals 29.1kt, representing a substantial growth of 182%. The significant outperformance in exports in the fourth quarter of 2024 indicates that the international market is increasingly accepting Chinese lyocell. This is likely to become a trend, with exports in 2025 also driving demand for lyocell.

The lyocell industry has bid farewell to the initial stage and entered the growth stage, with a rapid increase in market size. But it should be noted that the risk of supply growth exceeding demand growth still exists, especially in some large-scale facility start-up times, which may lead to a surge in supply and affect prices.