• Key w/w moves: Cotton +2%; Polyester -1%; HW DWP +3%, China-origin DWP +2%, medium and high-end VSF stable and Lyocell +1 w/w. Cotton’s premium to VSF is 64% (2021 average: 30%) and a 169% premium to polyester (2021 average: 150%). The VSF premium to polyester is currently 65% (2021 average: 94%).
  • VSF market stable this week: VSF market was rangebound this week and trades slightly increased in some areas. Downstream demand remains lacklustre, while raw materials keep increasing, so VSF plants are still expected to further raise offers next week. The VSF operating rate came is stable at 82%. VSF inventory days tick up slightly to 20 days. The theoretical VSF margin for Chinese producers is further in the red at -USD 115/t (mainly due to higher DWP prices) and the VSF/DWP spread is down 2% w/w (+12% YTD).
  • Domestic hardwood DWP +2% w/w, with the spot import price +3% w/w: The spot hardwood price is now USD 975/t and the DWP/pulp spread is currently USD 306/t (this level generally supports preference for DWP production over paper pulp production). Chinese DWP production was mainly contributed by Sun Paper (Zoucheng) and Hunan Juntai was temporarily producing paper pulp. There was restocking demand from downstream sector, but VSF plants showed resistance to new DWP offers. There is a clear uptrend for the pulp and DWP price but dependent on downstream interest.
  • Lenzing reported FY 21A results last week: Revenue
    +34% y/y; EBITDA +89% y/y with proposed DPS of EUR 4.35 (5% dividend yield). The 500kt DWP mill (cost leader) in Brazil is on schedule to start in H1 22E. Lenzing’s LT DWP price remains c.USD 900/t. Lenzing expects EBITDA in FY 22E to be significantly above 2021 levels. FY 24E targets were also reaffirmed: EBITDA of EUR 800mn (implies a 120% increase from FY 21A); ROCE >10%; Leverage <2.5x; specialty share >75% of fibre revenue; backward integration >75% in DWP and CO2 emission reduction of >40%.  
  • H&M Q1 22A sales development published this morning: Net sales increased by 23% y/y (+18% in LC). Results to be published on 31 March.

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