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Insight | Time:Jan 25 2018 2:01PM
Rayon market: countdown to Chinese Lunar New Year
 
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There is one month before Chinese Lunar New Year holiday. VSF market keeps relatively firm while rayon yarn and fabric market is covered with festival atmosphere.

Operating rate: holiday schedule mostly confirmed

Holiday schedule of rayon yarn and fabric mills
Region Start of holiday Restart production Remark
Zhejiang Around Feb 5 Around Feb 23 Mainly migrant workers
Jiangsu Feb 8-10 Around Feb 23  
Fujian Feb 8-13 Feb 22-23  
Guangdong Around Feb 5 After Feb 23 Mainly migrant workers
Shandong Around Feb 8 Around Feb 23 Mainly local workers
Henan, Hubei, Hunan and other areas Around Feb 13 Around Feb 23 Mainly local workers


Rayon yarn and rayon grey fabric mills kept stable production recently, but migrant workers taking up large proportion in Zhejiang and Guangdong-based plants already started to return to hometown with the coming Lunar New Year, thus the operating rate as well as production declined somehow. Based on sample survey of spinners located in Zhejiang, Jiangsu, Fujian, Guangdong, Hunan, Hubei and Shandong, most of which plan to suspend operation around Feb 8 and may not restart production until Feb 23. Spinners in Zhejiang, Guangdong and southern Jiangsu may have longer holiday of 3-4 weeks due to large percentage of migrant workers. Plants in Fujian, Shandong and other areas with majority of local workers and non-private companies will largely have holiday for 7-10 days.

Feedstock: building up stocks almost completed
Rayon yarn mills generally kept feedstock inventory to ensure the consumption till Lantern Festival. Rayon grey fabric mills flexibly built up stocks according to orders and most of them purchased feedstock on a need-to basis. Although VSF price kept firm and offers were even picked up, most yarn and fabric mills restrained by tight capital preferred to wait and see without expectation of further price hikes.

Inventory: generally low
In the past two years, rayon yarn and grey fabric mills intentionally controlled finished goods inventory and arrearage, especially at year-end when capital was tight. They would even stopped receiving orders rather than accept sales on credit. Some plants had absorbed part of yarn and fabric stocks after VSF price kept firm and even inched up, so most of them focused on delivery of products and withdrawal of capital without big inventory burden. The supply of some variety was even tighter.

Orders: without large volume
The performance of VSF in 2017 was not as striking as that of polyester and cotton. Besides changing feedstock choice of yarn and fabric mills brought by volatility of other products and room of profitability, demand change was also reflected by end-user orders. Downstream plants reflected that the increment of overseas orders was less than expected, which was not strong enough to bolster the market and restocking before Lunar New Year holiday. In addition, Chinese orders for rayon products were fewer versus cotton ones as the latter were already boosted by feedstock while the former were still mild. Therefore, rayon yarn and fabric mills are less optimistic about post-holiday market than past years.

Although rising rayon yarn and grey fabric offers have spurred downstream plants to build up stocks, the increase of traded prices is limited. Most plants keep stable operation amid heavy festival atmosphere.
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