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Insight | Time:Jul 4 2018 2:11PM
What can we expect on VSF market in this summer?
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The trading activity of VSF market is depressed while traders are active in selling fibers recently. Most participants are waiting for price decline in Jul, but downstream buyers do not eagerly expect falling feedstock market since yarn and fabric sales will be affected. What can we expect in this summer?

VSF supply starts to increase in Jul on restart of units and steady output brought by new capacities. Although some VSF plants still have tight spot supply, heads of companies think that as long as there is expectation of loose supply and there is no need to witness supply glut, it is hard to stimulate buying interest of spinners. As to downstream sector, the demand for VSF has obviously weakened under to tone of golden Sep and silver Oct when feedstock inventory is sufficient while fewer orders are received.

VSF market dominated by bears is lack of bullish factors. The appearance of market boom may depend on the stimulus of outside environment, according to the market satiation in the past years. There are several points that are noteworthy:

1. Under environmental pressure that is frequently talked about, many companies are requested to cut production or initially limit production.

2. VSF price slides down to certain level. For example, the theoretical loss of VSF is 1,000yuan/mt or even higher in early 2018, forcing some companies to maintain the facilities and the lower operating rate dropped to around 80%.

3. Worries over trade war are alleviated. Cotton price further climbs up on the expectation of reducing supply in medium-to-long term, causing expectation of rising VSF price and inflow of substitutional demand from downstream sector.

4. The intensive release of demand from products of strong seasonality like core-spun yarn.

The above-mentioned points are stimulus from aspect of supply cut and demand growth and they have to emerge in a short period that can take effect.
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