- The imported hardwood DWP averaged USD 1,114/t in May (+6% m/m and +1% y/y): The average DWP price for April-May 2022 was USD 1,083/t (-2% y/y and +17% q/q).
- Key w/w moves: Cotton -1%; Polyester 0%; HW DWP +0%; China-origin DWP +4%, medium-grade VSF +1%; and high-end VSF +1% and Lyocell +3%. Cotton’s premium to VSF is 34% (2021 average: 30%) and a 140% premium to polyester (2021 average: 150%). The VSF premium to polyester is currently 79% (2021 average: 94%) and the lyocell premium to VSF is currently 11%.
- VSF price was up 1% w/w: The VSF operating rate is stable at 78%. VSF inventory days are also stable at 13.0 days. The theoretical VSF margin for Chinese producers improves but remains in the red at -USD 120/t and the VSF/DWP spread improved by 3% w/w (+15% YTD). VSF is under pressure from both feedstock and the downstream sectors. There will be a bigger impact from raw materials in the ST, so VSF price is likely to rise.
- The Lyocell price was up 3% w/w: Lyocell sales remain good. The operating rate hit a 10-month high of 45% with the restart of the plant in Central China and some lyocell plants planned to further raise run rates in June.
- Domestic DWP prices gain further traction: The spot hardwood price remains at USD 1,140/t and the DWP/pulp spread is currently USD 328/t (this level generally supports preference for DWP production over paper pulp production). DWP supply remains tight. The operation of Chinese DWP mills was relatively steady as Sun Paper kept normal production and Hunan Juntai was considering about switching back to DWP production in early June.
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