• Key w/w moves: Cotton +7%; Polyester 0%; HW DWP 0%; China-origin DWP 0%, medium-grade VSF -2%; and high-end VSF -1% and Lyocell -1%. Cotton is now trading at a 2% premium to VSF (2021 average premium: 30%) and a 93% premium to polyester (2021 average: 150%). The VSF premium to polyester is currently 89% (2021 average: 94%) and the lyocell premium to VSF is currently 17%.
  • VSF prices under further pressure: The VSF operating rate is down further to 65% (from 67%) as some Sichuan-based VSF units were shut for maintenance. VSF inventory days ticked up further to 23.5 (from 21.0). The theoretical VSF margin for Chinese producers remains in the red at -USD 252/t and the VSF/DWP spread declined by 4% w/w (-6% YTD). Downtrend of VSF may speed up as the operation of large-scale VSF plants may exert bigger impact on the market tempo.
  • Lyocell market remains weak: The op. rate was stable at 53%. Most plants had limited orders and previous contracts had almost been implemented, driving inventories higher.
  • DP prices remain stable despite new offers being released: The spot hardwood price remains at USD 1,220/t and the DWP/pulp spread is currently USD 356/t (this level generally supports preference for DWP production over paper pulp production). In the Chinese DP market, part of Shandong-based units converted to paper pulp production and the daily output dropped below 1kt. In the import market, Jari’s pulp mill was shut for maintenance ahead of time due to the heavy rainfall in Brazil. Outlook for pricing seems to stable, with most DP mills releasing new offers in mid-August. However, there has been no strong buying interest shown by VSF plants until now.

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