- COVID-19 impact short lived (2 weeks) on
their Chinese ops: Site
continued through the Chinese New-Year (hence employees didn’t return home).
However, due to road restrictions, there were some issues in terms of inbound
logistics (2 weeks) and had to shut two of their production lines. All three
lines are now back up and running. Q1 demand impacted in China due to customer
operating rates; however, direct customers now back up at 80% utilisation (further
downstream and weaving getting back up and running). Online holding up, but
shopping centres will be under pressure.
- Global fibre demand expected to remain
healthy through to 2024: Wood-based fibres (4-6% p.a.) expected to
outperform synthetic (3-4% p.a.) and cotton (-1-1% p.a.).
- “Chinese VSF markets grim, but unlikely to
get worse”: 2019 industry
utilisation dropped by 700bps y/y to 77%. This was driven by capacity
additions, above average VSF inventories and trade tensions.
- Lenzing Specialties (VSF + pricing)
outperformed cotton and VSF commodity grades: Std VSF prices -30% to all time low of RMB 9,400/t.
- Lenzing
believes VSF capacity expansions have peaked: Net additions in 2019 were
550kt (+9% y/y), with +7.6% expected in 2020 (deemed feasible) and potentially
2.8% in 2021.
- Lyocell
market has developed as expected: China still expected to compete, but 18 months delayed (2019: 50kt and
2020/21e: 130kt p.a.).
- Key
projects remain on time and within budget: DWP 500ktpa in Brazil (CapEx of USD 1.3bn and cash cost
of USD 300/t, with start-up in H1 22e) and 100kt lyocell plant in Thailand (EUR
400m with ramp-up expected by the end of FY 21e). No equity plans during
strategy cycle.
- 2020 results expected to be lower y/y: Currently, limited visibility due to
coronavirus and expect a challenging market environment to persist. Commodity
prices likely to remain subdued, with viscose and DWP prices at historic lows,
but unlikely to get worse.
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