Although rayon market in the first quarter is not as hot as expected, there are still highlights. The spot supply of lyocell yarn and high-count yarn is tight, and some plants could arrange the production according to orders until mid-to-late Apr. Unlike the sharp rise and fall in previous years, VSF price is fluctuating around 13,000yuan/mt this year. Therefore, although the increase of conventional yarns varies, the loss has generally narrowed. At the same time, sales keep stable and the inventory is acceptable.
The relief of operating pressure, the support of orders and restocking demand have stabilized market expectations to a certain extent, and also restored the production activity of yarn mills, thus most of them maintained production during the Tomb Sweeping Festival. However, according to our observation, the increase of new orders has slowed down. Although downstream plants are still replenishing stocks, they usually do not urge delivery of the goods. Combined with the fact that the production based on orders has not been prolonged significantly by the dyeing mills, we can think that the proportion of end-user orders is declining, while that of intermediate stocking is increasing, so there are not many delivery restrictions, and the sensitivity to prices is high.
According to the current feedback, the foreign trade does not seem to warm up in the second quarter, and domestic demand will depend on off-season autumn and winter orders, which is not a market boom for rayon products, arousing worries over the performance during May-June. Considering the weak expectation and 5-day Labor Day Holiday in early May, the proportion of holiday arrangements at the end of the month may be as high as last year.
In the case of slowing fluctuations in raw materials and reduced cost variables, different from the previous model of blindly fighting for production, in fact, timely production adjustments, whether it is production reductions, having holidays, or product conversion may be the greater impact on differences in business operations. In the context of unpredictable end-user demand, the safe route is still to control the inventory.
