Viscose staple fiber: The turning point of prosperity is coming, and the industry is expected to usher in a rise in volume and price

Downstream demand improved, viscose staple fiber inventory remained low. At the beginning of 2020, the outbreak of the new coronavirus epidemic caused the production and sales of the traditional textile and clothing industry to be blocked. The downstream of viscose staple fiber is mainly rayon yarn in the traditional textile field, and the weak demand at the end of the industry chain leads to the difficulty of viscose staple fiber consumption and export. In March 2020, the apparent consumption of viscose staple fiber decreased by 20.5% year-on-year; In May of the same year, the overseas epidemic worsened, and the export volume of viscose staple fiber was only 15,880 tons, a significant decrease of 64.5%. Even if enterprises choose to reduce the load to cope with the pressure, the inventory of viscose staple fiber products is still high, and in mid-2020, the viscose inventory has been maintained at about 50 days, which is at a historically high level.

After the second half of 2020, with the gradual control of public health events in China, domestic textile orders have taken the lead in recovering, the loom load rate has continued to rise, driving the enthusiasm of yarn mills for viscose staple fiber procurement, and the apparent consumption of viscose staple fiber has grown steadily, while the viscose staple fiber industry is still willing to start construction in the same period, and the industry destocking trend is obvious. With the opening of the "gold nine silver ten" market, China's loom continues to raise negative and break new highs, and the downstream market gradually releases order signals. As of April 2, 2021, the stock of viscose staple fiber was about 14 days, which was significantly lower than the level of the same period last year.

The dependence of upstream dissolved pulp imports is high, the market supply is tight, and the price is picking up slightly

The cost of viscose staple fiber is mainly composed of raw material cost and processing cost. The raw material cost includes liquid alkali, sulfuric acid and dissolved pulp, etc., and the processing cost includes labor cost and power cost. Among them, the cost of dissolved pulp in raw materials accounts for 60% of the total cost, which plays a decisive role in the cost of viscose staple fiber. Dissolved pulp usually refers to dissolved wood pulp, which has a high cellulose content, good solubility, and low impurity content. In addition to dissolved pulp, cotton pulp pulp, bamboo pulp pulp, etc. are also the main raw materials for the preparation of viscose staple fiber, because the production of cotton pulp will produce strong pollution "black liquor" in the preparation process, its output has decreased significantly in recent years.

The import dependence of dissolved pulp is high and the market supply is tight. In 2019, China's dissolved pulp production was about 1.58 million tons, accounting for 21% of global production; Apparent consumption was 4.64 million tons, accounting for 61.9% of global production; The import volume is 3.06 million tons, which has been in a steady growth trend since 2014, and the dependence on dissolved pulp imports has been increasing, reaching 65%. Since 2017, the overall production of dissolved pulp in China has remained stable, the apparent consumption has continued to increase slightly, and the gap between domestic supply and demand is basically made up by imports. In addition, cotton production reduction and production pollution will reduce the supply of cotton short wool, and the consumption of dissolved pulp will further increase in the future, and the market supply will be tight.

The price of dissolved pulp recovered slightly, providing cost support for viscose staple fiber. Since 2019, the inner price of dissolved pulp has been in a state of slight decline, and as of October 15, 2020, the price of dissolved pulp fell to 5,300 yuan/ton. Then bottomed out and rebounded, as of April 2, 2021, the dissolved pulp price rose to 8,700 yuan/ton, reaching a historical high level in nearly five years, providing a strong cost support for the rebound in viscose staple fiber prices.

The main reason for the price fluctuation of viscose staple fiber is the demand of downstream spinning and clothing. At the beginning of the outbreak of the epidemic, the serious imbalance between supply and demand in the industrial chain pushed the price of viscose staple fiber to continue to fall, and the price of dissolved pulp remained stable as a whole. By August 2020, the price difference between viscose staple fiber and dissolved pulp had widened to 2,800 yuan/ton, which was at a historical low. In addition to a few Longtou rely on high-end production and low-cost advantages to achieve profit, the industry gross profit is roughly estimated at -3000 yuan/ton left and right, in the stage of deep losses. In the second half of 2020, the trend of spinning orders picked up, the improvement of supply and demand promoted the stable price of viscose staple fiber, and the major manufacturers ushered in the price adjustment cycle, the industry profitability improved, and the price spread cycle ushered in an inflection point.