There are mixed voices about business performance and expectations in the market recently. Thus, we have a summary based on market visits in Jiangsu and Zhejiang and sampling feedback.

 

Active resumption of work and stable sales

Due to the stagnation of production in many enterprises as well as taking holidays in advance last year, the workers were more motivated to return to work after the Spring Festival, and there is much less feedback on recruiting difficulties compared with previous years. On the other hand, the factories were also eager to resume normal operation, implementing orders signed before the Spring Festival and also building up stocks for “Golden Mar and Silver Apr”. In fact, the operation for each link of the industry chain is highly similar in this aspect. At present, the operating rate of rayon yarn mills is about 90%, and that of 100% rayon yarn is 53%. The operating rate of weaving mills is around 60%, that of cotton yarn and polyester yarn is also more than 60%. In the fiber segment, the operating rates of lyocell, VSF and VFY is respectively 69%, 81% and 90%.

 

Orders signed before the Spring Festival were of the nature of stocking up, while those after the holiday were mainly based on Chinese domestic seasonal demand. Although the reality is weaker than expected, it also supported the market for the past two months.

 

Hidden worries

It has been mentioned for several times that rayon products are highly dependent on overseas markets, and without the main engine of foreign trade, when the delivery of seasonal orders is completed, what will happen in the second quarter? Although the specific customs data has not yet been released, it is known that China's apparels and accessories exports from Jan to Feb were 149.89 billion yuan, a decrease of 7.5%, and textile exports were 132.41 billion yuan, a decrease of 15.9%.

 

Therefore, the restocking for each link has become cautious again, and traders have also changed from buyers to sellers. In addition, the current operating rate of factories is increasing, and the mentality could be changed overnight. There have been some low-price promotions before, and it has been restrained recently under the background of continuous fiber stabilization, but the upward momentum is still insufficient, and the pressure of losses remains.

 

Highlights also exist

However, tight supply and rising price also exists. Among related products, lyocell and cotton/rayon blended yarns are the biggest highlights. The former mainly benefits from orders for home textiles, and the latter is driven by Guangdong market that took a holiday much earlier for the Spring Festival. Lyocell's application in China mainly relies in home textiles, focusing on spring and summer fabrics. Given the promotion of upstream and downstream in recent years and the highlights in cotton/lyocell products, when the current price is similar to that of cotton, it is an innovative and cost-effective presence.

 

In terms of supply, the unstable production and pessimistic attitude last year led to limited stocking in each link of the industry. In addition, the sudden increase in demand led to tight supply of a niche product-lyocell yarn, and some enterprises transformed the machines and even pushed up the price of high-count compact siro-spun rayon yarn (the production will decrease after the machines are occupied).

 

Selection of raw materials

The spinners tend to be conservative about the procurement of raw materials under the operating pressure of themselves. Conventional yarn relies on the sales volume, but the current background of demand is not favorable to it. In comparison, the attractiveness of lyocell and blended yarns has increased, and some companies even reflected that switching to cotton yarns is better than loss-making rayon yarns, and the feedback in this regard is also increasing. In the face of changes in end-user consumption and competition in Southeast Asia, Chinese companies have followed the trend in adjusting the varieties.