Quarterly Update on Global Viscose Filament Yarn (VFY) Market
For the Quarter Ending June 2021
In the North American region, the restoration of the industrial infrastructure in the US Gulf coast accelerated the textile market activities with improvement in supply chains in Q2 2021. The pricing movement of Viscose Filament Yarn (VFY) remained on an uptrend as the feedstock wood pulp prices observed a hike of 40% since January 2021 and imports from the overseas market remained firm with an additional support of the high freight costs. Mass vaccination programmes amplified the public movement which provided extended support to the downstream activities. As a repercussion, the VFY demand outlook improved in the second quarter of 2021 and prices showed a marked surge due to multiple factors supporting the inflationary trend.
In China, the Viscose Filament Yarn (VFY) market was weak throughout the second quarter of 2021 as high-priced raw materials amidst rising inflation rate in China and consistent rise in the prices of cotton strengthened the wait and see approach amidst the spinners. Finnish Group Stora Enso suddenly announced shutdown at its wood pulp activities and pulled out from the Chinese Viscose market, ending its sales to the producers in the Xinjiang province. Whereas in India, the domestic market remained stagnant in the first half of the quarter due to the restricted activities as the second wave of COVID impacted the market activities. Demand remained muted due to hovering uncertainties in the Asian textile sector with strong anticipation that the Chinese VFY export volumes would likely return to the pre-pandemic levels if the control of COVID-19 pandemic in several countries takes place sooner.
During the second quarter of 2021, the VFY market in the European region observed raw material shortages due to hiked cost of wood pulp. The mass vaccination drives induced the public movement during the second half of the quarter. As a ripple effect, the market activities picked up pace and the offtakes from the textile industries surged during the second quarter of 2021. Although the production level remained balanced at several manufacturing facilities against the rising demand, surging operational costs resulted into significant hike in the Viscose Filament Yarn (VFY) prices offered by the regional producers.
For the Quarter Ending March 2021
During the first quarter of 2021, the North American VFY market was significantly affected, as supplies remained affected due to low inventories of the crucial feedstock. Several factories in the US Gulf region of the United States were forced to shut down production due to the severe freeze weather conditions despite strong demand from the downstream textile industries. By March-end, raw material pulp showed spike amid continued tightness in the supply as the industry showed recovery from the operational cuts impended since the mid of February. The supply-demand gap widened, resulting in an upward push to the VFY prices in the North American region.
Due to environmental protection inspections in China during the first quarter of 2021, the restricted supply of cotton linters followed by the plant’s turnaround during the spring festival led to affected supplies of VFY in Asia pacific market. Since the middle of the Q4 2020, the Asian VSF market had begun to recover from the pandemic induced slowdown, which proportionally supported the VFY (Rayon) market throughout the region. Grasim industries improved the production of VFY as the demand is India reached to pre-COVID levels in Q1 2021. Overall demand of the Asian market surged as the offtakes improved from the Indian textile industry. The prices of VFY remained stable in around USD 4950 per tonne levels in India during March.
In the first quarter of 2021, the European VFY market saw restricted supplies due to a scarcity of feedstock VSF, limited imports, and transportation delays in the northwest European region due to adverse weather conditions which hampered the production rates in several major facilities across the NW European region. The impeding ban on single use plastic boosted VFY demand in the European market, prompted by improved arbitrage with the Asian market and better offtakes from the textile sector in the peak season.
For the Quarter Ending December 2020
With an appreciable rebound in the textile sector in November, a sharp pickup due to festive demand across several Asian economies bolstered the market sentiments across various textiles units including Viscose Filament Yarn (VFY). Price of VFY (Bright 40D) was averaged at USD 4908 per MT in India, showcasing a significant revival in comparison to the previous quarter. Since several domestic manufacturers reported that the Indian market remained flooded with heavy VFY imports from neighboring countries like China, Indonesia and Vietnam, the country’s commerce ministry announced initiation of anti-dumping probe to check on the imports from these countries in the final week of December. Although the proposed dumping duty is likely to extend the profit margins of domestic manufacturers, but it might also squeeze the intakes for garners and weavers as the prices of domestically produced viscose yarn are already very high. In addition, anti-China movement in U.S. has embraced a shift in the outsourcing of textiles from China to India.
Supply of Viscose Filament Yarn (VFY) from overseas considerably increased with respect to the previous quarters owing to a considerable rebound in the retail sale of textiles. Increased demand for home textile products following the shift to work from home has caused a prominent increment in consumption for various textile products. Suppliers were heard catering imports from more than two Asian countries to restrain from the risk of any shortage amidst the pandemic uncertainties. In December end, the US government along with several private officials signed an MoU to assist Asia Pacific garment workers severely hit by Covid-19 hardships.
Recovery in the European Viscose Filament Yarn (VFY) market was severely hit towards the end of Q4 by the sudden buzz of new trace of coronavirus in UK. Partial lockdown implied in several parts of Europe majorly UK has caused a force measure in various garments stores causing the slowdown in the sales of garments in the later half of the quarter. Furthermore, the Brexit agreement signed between European Union and UK has also concerned several suppliers over their export margins in the coming years. Traders anticipate that this deal aiming to push UK as an independent trade identity could bottleneck the investment opportunities and supply chain in the near-term.