• Is VSF next? To date, global textile companies have been scrambling to cut Xinjian cotton from their supply chains. As with cotton, the opacity of the Xinjiang supply chain makes it impossible to prove whether viscose produced there is ethically made.
  • VSF from Xinjian region linked to sanctions: According to the SCMP, Chinese records show how the viscose supply chain in Xinjiang is intrinsically linked to entities already sanctioned by the US for alleged ties to forced labour.
  • China produces c.67% of global VSF: The Xinjiang region (>10% of global supply) produces c.1mtpa of VSF, of which most is spun into yarn, then fabric and then garments, making it difficult to trace. Xinjiang’s biggest producer is the state-owned Xinjiang Zhongtai Chemical and this company accounts for c.20% of total Chinese VSF supply according to OilChem.
  • The US is targeting a ban on all imports from the Xinjian region: The US Congress is attempting to pass the Uygur Forced Labour Prevention Act, which would ban all imports from Xinjiang unless the importer can prove they are not connected to forced labour.
  • Finland has continued to be Xinjiang’s biggest foreign supplier of DWP into 2021: Chinese customs data shows that almost all of Xinjiang’s DWP imports come from Finland, followed only by Chile. One of the major mills exporting DWP to China belongs to Stora Enso. Stora Enso has previously confirmed a long-standing relationship (since 2012) with the state-owned Chinese viscose manufacturer Zhongtai Chemical, which also has links to the Xinjiang Production Construction Corps (XPCC).
  • Based on media reports, Stora Enso is set to exit the DWP market: Based on company data, Stora Enso’s Enocell Mill has 490ktpa capacity of softwood pulp and DWP. This compares to installed global DWP capacity of c.6mtpa in 2020.
  • Bottom line: DWP supply will be reduced, while market pulp supply will increase. It is our understanding that Sappi DOES NOT supply DWP into the Xinjiang region. However, it will be important to follow the regulatory landscape if and how sanctions could impact VSF supply in the Xinjiang region and consequently VSF demand.

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