• Key w/w moves: Cotton -1%; Polyester -3%; HW DWP +1%, China-origin DWP flat, medium-grade VSF, high-end VSF and Lyocell all roughly flat w/w. Cotton’s premium to VSF has narrowed to 64% (2021 average: 30%) and a 185% premium to polyester (2021 average: 150%). The VSF premium to polyester is currently 74% (2021 average: 94%).
  • VSF prices stable: The resumption of work by downstream plants was better than that of last week, but due to notable decline of cotton and PSF, the spinners affected by low market activity were inactive to purchase raw materials and most of them were fulfilling the contracts. The logistics in Suzhou were affected by the COVID as the delivery of the goods slowed down.  The VSF operating rate improved to 82% (up from 81%) as a Shandong-based VSF line was put into operation. VSF inventory days tighten to 20 from 24.5. The theoretical VSF margin for Chinese producers is still in the red at -USD 31/t (rising DWP and chemical prices) & the VSF/DWP spread is flat w/w (+16% YTD).
  • Hardwood DWP prices edge up slightly:The DWP price moved up with trading gradually being done. The spot hardwood price is now USD 915/t and the DWP/pulp spread is currently USD 263/t (this level generally supports preference for paper pulp production over DWP production). Chinese DWP mills reduced operating rates. A plant in Central China temporarily converted to paper pulp production due to tight wood chip supply, while a Shandong-based plant maintained steady DWP production. Pulp supply will tighten in the ST due to maintenance, conversion, and withdrawal of pulp mills, driven by rising paper pulp and fluff pulp. Based on current dynamics, there is ST upside for DWP prices.  

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