• 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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