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Insight | Time:Jun 22 2018 3:34PM
Potential demand growth of compact siro-spun rayon yarn
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Rayon yarn was boosted by cotton at the end of May, but it was the slack season of rayon fabric as not many orders were received and grey fabric was hard to follow up. Therefore, rayon yarn sales were mainly triggered by restocking of weaving mills amid bullish expectation. Trades were increasingly hard to be done with rising rayon yarn price. The performance of compact siro-spun yarn was eye-catching as the tempo of price increase was not lower than that of VSF and sales had been favorable. Fujian-based large plants also witnessed tight delivery. The prosperity of compact siro-spun rayon yarn market was likely attributed to demand growth of cotton yarn.

Viewed from the above chart, price spread between cotton yarn and rayon yarn is relatively steady. Cotton yarn took the lead in rising in mid-May and rayon yarn started to climb up in late May, with increment of around 1000yuan/mt for each variety. However, it might be the increment of 1000yuan/mt leading to weaving mills’ feedstock choice change. Cotton and viscose as the most similar raw materials whose prices are always interactive. Much higher or lower price of the one than the other could cause changes of downstream demand.

As the segment of gaining meager profits in the industry chain, weaving mills pursue higher profits by curbing feedstock cost as their first choice. Compared with cotton yarn of almost 29000yuan/mt, the performance-price ratio of rayon yarn is undoubtedly attractive. According to market feedback, grey fabric of warp and weft direction that needs two kinds of cotton yarn counts can reduce cost considerably by replacing either item. Given similar property of cotton and viscose (rayon fabric even has better luster), most apparel customers can accept the effect of finished products. To air-jet looms, there is no difference between rayon yarn and cotton yarn. The efficiency and rate of finished products of rayon yarn is even higher, so the substitution is logical.

On the other hand, the positioning of compact siro-spun is high-end yarn, which is followed by siro-spun yarn. Vortex-spun, open-end and ring-spun yarn as the general and most ordinary products can be replaced by each other when prices are greatly divided due to similar properties. Siro-spun yarn performs differently due to feedstock divergences while compact siro-spun yarn is hard to be replaced due to great differences of raw materials and yarn quality.

To sum up, rayon market is indeed affected by cotton this year. Whether driving force of feedstock or yarn demand flow is good to rayon yarn mills. Moreover, high-end product can be undoubtedly taken into account compared with ordinary ones of fierce competition.
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