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Insight | Time:Dec 26 2017 10:48AM
Structural changes underway in VFY industry
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The recent operating rate cut of VFY plants is rarely seen in 2017, which is mainly attributed to reduction of one manufacturer in China. Although VFY capacity of China maintains just over 200kt/yr in recent years, the industry is undergoing structural change.

VFY capacity change of China
Company 2016 2017 2018
Xinxiang Chemical Fiber   10 (delayed) 10
Jilin Chemical Fiber +20;-5 20  
Hubei Golden Ring      
Yibin Grace      
Nanjing Chemical Fiber     To be confirmed
Dandong Wuxing     Shut down
Zhejiang Zhonghui     To be confirmed
Jiujiang Jinyuan      
CHTC Helon Shut down -7  
Swan Fiber Shut down in 2015    

The operation of VFY companies has been affected by increasing pressure of environmental protection. In recent three years, one plant stops production per annual. In 2017, rumors about relocation and shutdown are heard for several third-grade VFY plants. Finally, Dandong Wuxing as Chinese first chemical fiber plant announced shutdown at the end of year. Although total volume may keep stable in 2018 as the reduction can be made up by delayed start-up of Xinxiang Chemical Fiber's 10kt/yr continuous spinning VFY unit, the structural change and adjustment is becoming more and more outstanding.

Capacity expansion is largely from first-grade VFY and second-grade VFY holds steady while third-grade VFY capacity is gradually decreasing. Therefore, the percentage for each grade of VFY maintains the change of 4-5% per annual. The proportion of first-grade VFY capacity will increases to almost 60% from 45% and second-grade VFY will maintain the share of around 25% while third-grade VFY will gradually reduce to around 15%. Leading companies keep steady development amid advantages of product quality and mass production while small-scale ones are faced with shutdown since prices are difficult to cover increasingly higher production cost.

Matthew effect exists in viscose fiber industry, which is similar with other chemical fibers. Meanwhile, VFY product structure is gradually changing. Continuous spinning VFY is expected to take up about 40% of total, with export dependency further rising above 35%.

To sum up, there is steady growth of demand and higher recognition of medium and high-end VFY. Compared with silk with complicated weaving and post-treatment as well as higher price, VFY is undoubtedly a good alternation. Moreover, upgrading manufacturing is requested in consideration of its application in high-end market.
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