• Key YTD moves: Polyester +21%; HW DWP +38%; China-origin DWP +30%; medium-grade VSF +11% and high-end VSF +13%. In contrast, Lyocell is down 5%.
  • VSF trading mood finally shows signs of improving after weeks of sustained pricing pressure: Sateri and Tanshan Sanyou were both quoting in excess of RMB 13-13.2k/t for medium-grade VSF. The VSF operating rate jumped from 67% to 72% as some VSF plants in East China came back from maintenance. VSF inventory days dropped slightly to 27 as spinners increased the pace of accepting new deliveries.  The VSF/DWP spread improved by 5% w/w but is down 7% YTD. The theoretical VSF loss for Chinese producers narrowed to -RMB 442/t (+43% w/w). With August usually being the peak season for VSF demand, the outlook for VSF pricing is bullish and likely to increase. 
  • Imported hardwood DWP prices finally see some pressure, tracking VSF weakness in the past few weeks: In China, operating rates at DWP mills dropped further as Sun Paper (Zoucheng) was producing paper pulp, while Hunan Juntai was selling down DWP stocks. Based on current dynamics, hardwood supply is sufficient, and with lower paper pulp prices, further weakness is expected.    

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