Did rayon yarn kick off a bull market?

Since the National Day, prices of VSF, rayon yarn and grey fabric all have gone up. After the holiday, VSF and rayon yarn increased by about 2,000yuan/mt, and grey fabric rose by 0.20-0.50yuan/m. It seems that a new round of bull market is about to emerge, so where will the market go?

1. Higher VSF price boosted by reducing losses and a sharp rise in cotton.

Under the continuous rise in the feedstock prices such as caustic soda and coal, the cost of VSF plants was high, operating rate was low, and the industry O/R dropped to around 60% in Sep. As theoretical losses once exceeded 2,200yuan/mt, the plans were reluctant to undersell stocks or withheld offering at the end of the month, and the mainstream VSF price reached 12,000yuan/mt. During the National Day holidays, as purchasing prices of seed cotton in Xinjiang rose sharply and cotton yarn price changed from day to day, viscose prices rose sharply and rayon yarn followed up and saw a rapid increase of about 2, 000yuan/mt. The current mainstream viscose was offer at 14,000-14,500yuan/mt, ring-spun R30S price rose to about 19,000yuan/mt. It's not hard to see that the increase in viscose prices were more stimulated by the need to reduce losses and the large rise of cotton prices.

2. Higher grey fabric prices stemmed from cost promotion and production reduction.

Since the National Day, due to the sharp rise in raw materials, the promotion of costs, and lower output of weavers due to dual controls and power cuts since mid-September, the weavers has quoted up sharply after the holiday, with an increase of 0.20-0.50yuan/m, resulting in mixed prices. For plain fabric (close selvage), R45SxR45S 100x76 63" 1/1 has risen from 3.70yuan/m to the current 4.20yuan/m, and fine fabricR60SxR60S 90x88 65" 1/1 for air-jet has risen from 4.35-4.40yuan/m to 4.60-4.70yuan/m. However, at present, most of the fabric mills mainly fulfill previous contracts, with more price inquiries but less actual transactions in the market.

In conclusion, under the stimulation of the jump in cotton prices, as well as reluctance of VSF plants to sell at low price and the need to reduce losses, after the holiday, VSF prices sharply increased, and rayon yarn followed up, with an increase of about 2,000yuan/mt. As the feedstock cost accounted for nearly 70% of the grey fabric cost, driven by the higher cost, as well as the reduction of the output of weavers caused by power limit, the grey fabric price went up with the flow, the upstream and downstream appeared up together. It is expected that the price will be stable to firm in the short term.

However, with more gin yards in Xinjiang stopping buying high-priced cotton and stricter policy regulation and control measures, the purchasing prices of seed cotton has dropped sharply since last weekend, and those of machine-picked seed cotton in northern Xinjiang has decreased by more than 1yuan/kg. Recently, more market players hold wait-and-see stance. Without new welcome fillips, it is expected that the overall rise will slow down.