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Insight | Time: Mar 18 2020 2:04PM
Rayon yarn market faces larger pressure than cotton yarn and polyester yarn
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At present, textile industry has basically recovered, but weakness of feedstock is relatively common amid the pandemic. In the downstream market, three major varieties like rayon yarn, cotton yarn and polyester yarn performed divided, and the rayon yarn has larger burden.

As for yarn prices and profits, several varieties have performed steadily after the Spring Festival holidays, and the profit margin has expanded after feedstock weakened. Polyester yarn performed even better while rayon yarn mills which had pre-holiday replenishment sustained. Those buying high-priced cotton only maintained a small profit. Rayon yarn burden comes from inventory.

It can be seen that the inventory of cotton yarn and polyester yarn was available for three weeks with little burden, while rayon yarn one has risen to a rare high of more than 30 days, which not only suppressed the price, but also affected enthusiasm for production. Bleak end-users demand is a common situation (turnover in China Textile City has not recovered to 5 million meters, and the operating rate of grey fabric mills is still below 50%, mainly relying on pre-holiday orders), but why rayon yarn is an exception?

The problem comes mainly from the supply side. O/R of cotton yarn mills was similar to the downstream, which enabled yarn mills to maintain 100% sales ratio. Although prices and profits were disappointing, there was no more inventory burden. Polyester yarn mills resumed work slowly with better support from exports. In comparison, the resumption time of rayon yarn mils was earlier, especially in mid to late-Feb, there were obvious differences with downstream weavers, leading to faster inventory accumulation except for those relying on pre-holiday orders and exports. Once the machine turned on, it cannot easily halt or stop production, so spinners can only expect the end-users demand to improve as soon as possible.

In Mar, the best case is that the market can restart, digesting the existing inventory, and even if the price is hard to rise, it can give some confidence; if it is extended to Apr, the spinners are bound to respond through output control and self-adjustment. Pandemic in China has been basically controlled, but it is still expanding outside China. If the domestic market demand recovers, there are still some concerns that the impact of overseas pandemic on end-users orders will be gradually reflected in a long time.

In general, the textile industry in 2020 is still facing burden and needs to prepare early and adjust in a timely manner.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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