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Insight | Time:Jun 27 2018 4:35PM
VSF price to drop further in Jul
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VSF market kept uptrend in the first half of Jun, but ZCE cotton futures fell to limit down in mid-to-late Jun, exerting negative impact on market confidence and enhancing wait-and-see sentiment of VSF market, leading to sharp decline of fresh business.

VSF offers were intensively picked up in early Jun as medium-grade and high-end VSF was respectively quoted up to 15000yuan/mt and 15300yuan/mt. Cotton futures dropped later, but buyers who had rigid demand still kept normal procurement amid tight supply. The supply further tightened on maintenance of some large-sized medium-grade VSF plant and medium-grade as well as high-end VSF was further quoted up to 15200yuan/mt and 15400yuan/mt. However, downstream plants by signing more contracts slowed down procurement tempo afterwards.

After Sino-US trade war heated up around mid-Jun, ZCE cotton futures fell to limit down, shattering market confidence. Spinners sharply reduced purchasing volume as massive contracts were still waiting for implementation. As to VSF plants, there was no big selling pressure in the short run as large amount of contracts had been signed. Traders were relatively active in selling products and prices were generally lower versus VSF producers.

The trading activity of VSF market was subdued in late Jun as fresh business was limited, but spot supply remained tight. In Jul, the operating rate is expected to improve due to restart of some facilities. VSF price started to slide down in later Jun and it is expected to drop further in Jul.
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