Lenzing successfully opens world’s largest lyocell plant in Thailand

  • Key w/w moves: Cotton -2%; Polyester +4%; HW DWP +3%, China-origin DWP +7%, medium and high-end VSF +1% and Lyocell +1 w/w. Cotton’s premium to VSF is still 61% (2021 average: 30%) and a 162% premium to polyester (2021 average: 150%). The VSF premium to polyester is currently 61% (2021 average: 94%).
  • VSF market stable this week: The VSF operating rate came under pressure for environmental reasons and is now 82%, down from 84%. VSF inventory days flat at 19 days. The theoretical VSF margin for Chinese producers is further in the red at -USD 100/t (mainly due to higher DWP prices) and the VSF/DWP spread is down 2% w/w (+14% YTD).  
  • Domestic hardwood DWP price jumps 7% w/w, with the spot import price up 4% w/w: Pulp offers increased much this week while downstream plants became perplexed. Imported dissolving pulp suppliers also intended to raise offers, but there was only a public offer of hardwood pulp from Arauco at USD 960/mt and the offer at USD 980/mt released by the plant located in south hemisphere (we assume Sappi). Chinese pulp mills released the signal of tight wood chip supply as Sun Paper maintained limited production, while Hunan Juntai still could not switch back to DWP production in the ST. The spot hardwood price is now USD 960/t and the DWP/pulp spread is currently USD 307/t (this level generally supports preference for DWP production over paper pulp production). DWP supply is tight currently, which is supportive of further price increases.   
  • Impact of Russia-Ukraine tensions on rayon grey fabric export: China’s rayon grey fabric is exported to nearly 100 countries and regions, which is mainly exported to Africa and Asia. There are more exports to Mauritania (23%), Thailand (15%), Brazil and Turkey, but less to Russia (0.08%) and Ukraine (0.01%).
  • Lenzing has successfully opened the world’s largest lyocell plant in Thailand (100ktpa): The project was delivered on schedule and at budget (EUR 400mn) after two and a half years of construction. Lenzing report results this Thursday.
  • H&M Group temporarily pauses all sales in Russia: Additionally, their stores in Ukraine have already been temporarily closed.    

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