• Key YTD moves: Polyester +17%; HW DWP +51%; China-origin DWP +43%; medium-grade VSF +16% and high-end VSF +38%.
  • Further pressure on VSF prices, down 5% in two weeks: Modal has been stable, while lyocell market has been rumoured to seeing producers selling under pressure. The VSF operating rate has also weakened in the past two weeks from 83% to 75%, impacted by maintenance at a facility in Jiangsu. Fifth week in a row of rising VSF inventory days – now at 18.5 days. The VSF/DWP spread is down 5% in the past two weeks but still up 16% YTD. In light of improving polyester and cotton futures, coupled with an optimistic Q1 GDP for China, VSF prices should stabilise.
  • DWP prices remain stable: Sun Paper (Zoucheng) and Sun Paper (Yanzhou) are producing DWP, while Hunan Juntai is planning to switch back to DWP. Based on current market dynamics (lower VSF prices), it has hard to see DWP prices rising from current levels. Downside risk appears limited considering DWP mills are not selling under pressure and ocean freight costs have increased.

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