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Insight | Time:Dec 1 2016 4:56PM
Is 15,000yuan/mt low enough for VSF?
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VSF market is temporarily stable, despite minor decrease recently. The inventory burden of VSF plants was alleviated by intensive procurement in mid-Nov and relatively stable orders recently. Monthly settlement system has been cancelled and prices keep firm for small deals, which were even picked up by 100-200yuan/mt in the middle of Nov.

Small deals are largely concluded at 15,300yuan/mt and large ones are done around 15,000yuan/mt. VSF market is regarded to perform better than expected as the line of 15,000yuan/mt has been defended, although downstream buyers think it is not low enough.

Price comparison of chemical fibers (unit: yuan/mt)
Product 2016-10-31 2016-11-30 Change
PSF 1.4D 7,155 7,375 3.07%
Polyester DTY 10,535 10,850 2.99%
Polyester FDY 9,050 9,780 8.07%
Polyester POY 7,430 7,910 6.46%
Nylon DTY 16,700 18,500 10.78%
Cotton 3128 15,380 15,900 3.38%
Medium-grade VSF 16,000 15,280 -4.50%

Rising commodity market has boosted textile raw materials recently. It can be seen that VSF is 600yuan/mt lower than cotton at present and the spread will expand to 900yuan/mt in case of stable cotton market while falling VSF price to 15,000yuan/mt. In view of the stability of both products, VSF has slight advantage to downstream production cost with reducing downward risks. Viewed from the above table, the increment of other chemical fibers was 3-10% in Nov, so VSF price is not actually high.

However, some participants consider the price of 15,300yuan/mt or even 15,000yuan/mt to be high. It really does by viewing historical data. VSF price generally heads south at the end of year because of thinner demand and tighter capital, but it is noteworthy that production cost like pulp, chemical materials and transportation has gained considerably.

VSF price in later Nov of past few years (unit: yuan/mt)
Year 2012 2013 2014 2015 2016
Later Nov 14,050 12,760 11,900 14,320 15,310

When the demand was rather depressed in the past few years, VSF plants would be unwilling to further cut prices when losses reached around 1,000yuan/mt. Therefore, they will reduce supply and there will be a relative balance between demand and supply.

In a word, there are different views on the price of 15,000yuan/mt by analyzing from various angles.
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