VSF is Sinking into Loss

Since July, the price of viscose staple fiber showed rising trends and the leading quotation of 1.5D rose to 15,000 Yuan/ton in the market. This rebound seems to give a glimmer of hope for the enterprises, but VSF price returned to be stable again owing to the digestion of good news. VSF price will still be at a loss while the terminal demand has no substantial progress. Let’s analyze the overall situation of VSF industry chain from the aspect of cost in early July.

 

 

At present, the price of cotton linter, the upstream raw material of cotton pulp, rises slightly while maintaining the stability, the trading atmosphere has improved than the previous period, but the price of cotton linter is hard to increase owing to the decline in previous times. Now the price of short velvet increases to 3,500 Yuan/ton, the quotation of higher-quality compound flocking is about 3,500 Yuan/ton in Xinjiang region. Calculated from the price with the losses of 30% in the process of production, the raw material cost of short cotton pulp is 4,550 Yuan/ton and then plus 3,000 Yuan/ton of processing charge, the total cost of short cotton pulp is 7,550 Yuan/ton, and the current negotiating price of cotton pulp mill is about 7,500 Yuan/ton. However, the cotton pulp mill is still at a loss due to the high price in upstream, which resulted in high production costs and insufficient demand in downstream. The cotton pulp mills want to boost the market through stopping production and maintaining the machine in order to limit the capacity.

 

According to the cotton pulp price of 7,500 Yuan/ton and the conventional losses of 14%, the raw material cost of VSF is 8,550 Yuan/ton, if plus the current processing charge of 8,000 Yuan/ton, the cost of 1.5VSF is as high as 16,550 Yuan/ton. However, the leading quotation of medium products is 15,000-15,200 Yuan/ton, the price of high-end products is 15,300 Yuan/ton or above, which increases 300 Yuan/ton than before. The VSF manufacturers are still in the condition of deficit compared with the cost price, the manufacturers produce 1 ton of VSF and the losses will reach 1,550 Yuan/ton. Although now the inventory of VSF stays at reasonable interval and is unlikely to decline, VSF price is still hard to increase owing to the high inventory in the downstream yarn enterprises. The operating rate is about 70% in the market.

 

The quotation of spun rayon yarn goes steady in early July and VSF price also increases to some extent. According to the conventional cost accounting of enterprises, the situation of cotton yarn mill is very severe. At present, the quotation of woven 30S is 18,300 Yuan/ton and the trading atmosphere is better than before, but the cotton yarn mills have to stop production owing to the great pressure of inventory in Shandong region. In addition, the mills are also lack of confidence in the operation of aftermarket due to the insufficient purchasing of grey fabric in terminal market and inconspicuous demands, so they choose to stop production to reduce the financial pressure.

Generally speaking, the atmosphere of viscose staple fiber industry chain is relatively nervous and it is at the edge of losses. Although VSF price slightly increases than June, the terminal consumer market still did not turn better and the grey fabric manufacturers are difficult to go forward under adverse circumstances.