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Insight | Time:May 31 2018 5:07PM
VFY market to weaken in the coming slack season
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Although the characteristics of traditional peak and slack season of textile market gradually become vague, the influence of seasonality still exerts some impact on the market. VSF market is going up recently whereas VFY is relatively normal as the price is gradually falling with the coming slack season.

VFY sales is gradually slowing down in May and the inventory in VFY plants has already climbed up. If downstream plants do not increase procurement in the coming slack season of 2-3 months, the selling pressure of VFY companies will be cumulated.

Moreover, the start-up of 10kt/yr continuous spinning VFY unit this week will obviously pose impact on the market. The operating rate of VFY industry has been stabilizing around 93%, it is actually because that Dandong Wuxing is no longer included in the capacity list and Nanjing Chemical Fiber has cut the run rate. Some plant maintains the facility recently, but the influence is smaller versus the start-up of new capacity. New units will be under testing for some time after raw materials are fed into the equipment, so some inferior products may emerge before the quality stabilizes.

VFY plant operating rate change
Company Capacity change
Dandong Wuxing Shudown, no longer included in capacity list
Nanjing Chemical Fiber Lower output by cutting O/R
Xinxiang Chemical Fiber Start-up of 10kt/yr continuous spinning VFY unit

There are bulls in overseas market like removal of anti-dumping duty in India, rising exchange rate and easing worries over trade war, but the demand cannot be released on large quantity immediately. In the first few months of this year, the increment of export is not obvious compared with the same period of past years. During slack season, exports largely bolster sales ratio of first and second-grade VFY and relieve inventory burden. It can be seen from the above chart that VFY sales in domestic market will keep slowing down. Since the beginning of this year, sales in the past few month are relatively flat, despite restocking for Spring Festival in Jan.

VFY price has increased somehow since the beginning of this year, but pulp and chemical material prices have dropped, so VFY profits have generally improved. However, it still has room for further decline under current environment and some companies with higher production cost may face earnings pressure again.
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