Since August, due to persistent high temperatures around 40°C in Shandong, Jiangsu, Zhejiang, Fujian, Sichuan and other provinces, local viscose staple fiber factories have been working to prevent heatstroke and responded to the local government’s “industrial power to give way to civilian power.” According to the call, some factories have reduced production or stopped production directly, and the operating rate of the viscose staple fiber industry has dropped to between 60% and 70%. These areas are also the main producing areas of rayon yarn, and the operating rate of this industry has also dropped from the original 70% to 50%. As the operating rate of the rayon yarn industry has declined more than the operating rate of the viscose staple fiber industry, viscose staple fiber factories have experienced both volume and price declines in August. In August, viscose staple fiber factory quotations were reduced by 500 to 1,000 yuan/ton, to around 15,000 yuan/ton, and traders’ shipping prices were at 14,000 to 14,500 yuan/ton.
If we only start from the fundamentals, the market still cannot see the hope of converting viscose staple fiber prices from cost-push to demand-pull. However, if we combine the operating rates of downstream cloth mills and circular knitting mills, the demand-pull model is actually changing. Happened quietly. As for the longer-term viscose market trend, the author believes that if the price of viscose staple fiber can exceed the price of cotton by the end of September or late October, then the viscose staple fiber industry will get rid of the burden of nearly a year of losses. Gradually move towards the profit stage amid moderate price increases.
01 Multiple factors may drive up the price of viscose staple fiber
After entering July, affected by the decline in cotton futures prices, the market price of viscose staple fiber continued to weaken, gradually transforming from a negative decline to a clear decline. Throughout July, the viscose staple fiber market was in a stalemate, with manufacturers’ quotations showing high prices but no market. Some traders’ shipping prices ranged from 14,000 to 14,500 yuan/ton. The operating rate of the viscose industry is between 70% and 76%. Due to the falling prices of viscose staple fiber, some viscose staple fiber factories have adopted the method of slowing down production to alleviate the contradiction between rising inventory in the sluggish market and at the same time delaying their own pulp production. Meal stock consumption.
As of August 16, affected by the price policies of major manufacturers, some Shandong factories followed suit and adjusted their quotations by 200 yuan/ton to 14,800 yuan/ton. Although factory prices have been reduced, the extent of the factory price reduction is seriously lower than market expectations, causing the supply of goods below 14,300 yuan/ton in the early period to disappear from the market. In the second half of August, the overall market price of viscose staple fiber was 14,300~14,800 yuan/ton, and traders’ shipping prices were 14,300~14,500 yuan/ton; the factory quoted a lower price of 14,800 yuan/ton, and the market price of viscose staple fiber was 14,300~14,800 yuan/ton. Gradually get out of the pattern affected by the decline in cotton futures prices.
However, the impact of falling cotton prices on the entire spinning system did not completely subside in mid-August, and spinning mills did not receive more orders. In this case, if we start from the fundamentals, as long as orders from downstream spinning mills do not come, the priceless market will continue. In this case, if you need to analyze the time nodes of market changes, you need to introduce financial market price trend technical analysis methods, and Dow Theory is one of the classic technical analysis methods.
In the previous article, the author has mentioned: If we only start from the fundamentals and only see that the downstream spinning mills have not received large orders from gray cloth mills, the market still cannot see the price of viscose staple fiber changing from cost-push to demand-pull. There is hope for conversion; at the same time, high temperatures superimpose power cuts, and the operating rates of viscose staple fiber and rayon yarn mills are both at 50%, causing most market practitioners to believe that the demand-driven model is hopeless. However, if we combine the operating rates of downstream cloth mills and circular knitting mills, we can see that demand-pull is actually happening quietly. According to statistics from relevant agencies, since August, the operating rate of cloth factories has changed from 30% to 40% in July to 40% to 50%; the operating rate of circular knitting machines has also increased from 20% to 30% in July. Shift to 30%~40%. Combined with this phenomenon, the operating rate of the viscose staple fiber industry dropped from 70% to 55%, and the yarn mills dropped from 68% to 45%. It is not difficult to find that although the operating rate of the entire link is poor, the operating rate of the downstream is improving. While the upstream operating rate is declining, it sends a clear signal: All links in the entire viscose staple fiber industry chain are undergoing destocking operations, and once the inventory drops, prices in the entire link will inevitably fluctuate again.
At the same time, due to the impact of the Xinjiang cotton incident, some yarn export companies have gradually shifted from cotton orders to non-cotton fiber orders when receiving orders. There are two main types of non-cotton fibers: one is polyester staple fiber and the other is viscose staple fiber. Since the characteristics of polyester staple fiber are far different from those of cotton in the finishing process such as dyeing, most of these yarn companies will give priority to viscose staple fiber. In terms of this amount of energy conversion, it can also be expected that the use of viscose staple fiber will gradually increase. This is also a departure from the current low operating rate of viscose staple fiber factories. Therefore, from the perspective of quantity and energy, there is a possibility that the price of viscose staple fiber will rise again.
02 Interaction between cotton and viscose staple fiber price trends
The author once mentioned that at the end of the third quarter and the beginning of the fourth quarter, the price of viscose staple fiber is likely to be higher than that of cotton. Judging from the actual operation of market prices from July to August, this prediction is gradually being fulfilled.
In fundamental analysis, it was difficult to draw the above conclusion in June, when the situation was:
1) Six months ago, the price difference of “cotton-viscose staple fiber” was 9,000~10,000 yuan/ton, far exceeding the average price difference of 3,500 yuan/ton, which is abnormal from the perspective of technical analysis;
2) Since 2018, cotton prices have been higher than�The price of rubber staple fiber, and under normal circumstances, one of the two has a phenomenon of mutually high prices within a certain time span. From a time perspective, this is not normal;
3) Because the price of cotton is too high, but the price of viscose staple fiber is too low, downstream yarn mills will give priority to low-priced viscose staple fiber when selecting raw materials. However, from August 2021 to the present, it has been nearly a year. , did not see this change happening;
4) Due to the “Xinjiang Cotton” incident, some textile and garment export companies gave priority to non-cotton fiber orders when receiving orders. This has driven up the transaction volume of non-cotton fibers, but it has not driven up their prices. rise.
In order to better understand the price trend of “cotton-viscose staple fiber” and to deeply understand the “price evolves according to trend” in the Dow Theory, the author selected the “viscose staple fiber-cotton” price chart from 2015 to the present. (Figure 1) as the research object.
Figure 1 “Viscose staple fiber-cotton” price trend chart from 2015 to the present
It can be seen from Figure 1: 1. Before mid-August 2015, the price of cotton was higher than the price of viscose staple fiber; 2. From late August 2015 to mid-May 2017, the price of viscose staple fiber was higher than the price of cotton. High; 3. From late May 2017 until now, the price of cotton has been higher than that of viscose staple fiber.
Judging from the price trend, during the period when the price of viscose staple fiber was higher than that of cotton, the prices of the two showed a coordinated upward trend. When the price of cotton is higher than that of viscose staple fiber, the situation is more complicated. It can be divided into three situations:
1) The two will rise together: This period mainly runs from early September 2020 to late April 2021. The specific event is that cotton rebounded from an oversold situation, which drove the price of viscose staple fiber to stabilize and start to rise. The end of this round of market is This is marked by the decline in viscose staple fiber prices.
2) The two fell together: This period mainly lasted from November 2018 to March 2020. The specific event was that the price of viscose staple fiber fell first, driving the price of cotton to fall. The end of this round of market was marked by the oversold rebound of cotton.
3) Divergence between the two: In the market wave from late April 2021 to July 2022, the trend of the two has diverged seriously, and in this process, the price difference between cotton and viscose staple fiber has exceeded 10,000 yuan/ton. Moreover, this kind of large-level divergence trend with a large time span cannot well show the synergy of the price trends of cotton and viscose staple fiber. Therefore, the trend at this stage requires technical analysis combined with the fundamental conditions of the two to judge. The subsequent price trend.
According to the definition of Dow Theory and combined with Figure 1, it is not difficult to find that the price movements of viscose staple fiber and cotton follow a certain periodicity. Especially for viscose staple fiber, from 2016 to April 2021, it has perfectly demonstrated the cycle of rising and falling in the range of “8500~17000” yuan/ton with a middle price of 12,750 yuan/ton.
Similarly, the price trends of “cotton-viscose staple fiber” also show certain similarities. For example, when the price of viscose staple fiber and the price of cotton rise together, if the price of viscose staple fiber is higher than the price of cotton, then both They all showed a healthy rise, and when they fell later, there was a period of equilibrium or box shock.
In summary, when cotton prices begin to fall at the end of June 2022, two judgments can be made based on the Dow Theory: 1) The price difference between “cotton-viscose staple fiber” will gradually return to within 3,500 yuan/ton, The divergence between the two may end and enter a state of synergy; 2) If the price of cotton falls too fast, it will drag down the price of viscose staple fiber; but after the market repairs itself, the price of viscose staple fiber may be lower than the price of cotton. high situation. Today, the first point of these two inferences has been verified by the market. As for the second point, I believe it will be witnessed in September.
03 The viscose staple fiber industry is expected to enter a profitable stage
In the fundamental link, two questions need to be considered: How much cotton can be released? Of the amount of cotton released, how much of viscose staple fiber and polyester staple fiber occupy respectively?
Regarding the first question, according to a survey of textile factories in Shandong, Hebei and other provinces, about 30% to 60% of companies have “converted cotton to sticky”. A conservative estimate is that 500,000 to 700,000 tons of cotton will be exported. Measure for non-cotton fibers. It is precisely based on this set of data that the price of the main cotton futures contract in July has been falling, with the lowest falling to 13,560 yuan/ton. Regarding the second question, based on the usage habits of spinning mills, it is expected that the ratio between the two is about 7:3; it can be concluded that viscose staple fiber can increase the amount by about 350,000 to 490,000 tons.
Judging from the technical level, we need to wait for the turning point when the price of viscose staple fiber is higher than that of cotton, because the price trends of “cotton-viscose staple fiber” have diverged for a long time before this turning point. The market has a demand for self-healing. Based on this consideration, it is necessary to wait for the confirmation of two transition points. Judging from the price trends of the two in mid-August, the intersection of viscose staple fiber and cotton prices is expected to occur for the first time at the end of August, and the second confirmation may occur at the end of September or late October. If the prices of the two can cross for a second time, and the price of viscose staple fiber is higher than that of cotton, then it is conceivable that the two prices will mainly rise from late August 2015 to mid-May 2017. The fiber industry will get rid of the burden of losses for nearly a year and gradually move towards a profitable stage amid moderate price increases.
In other words, it is conceivable that the main upward trend of the two prices will come from late August 2015 to mid-May 2017. The viscose staple fiber industry will get rid of the burden of losses for nearly a year and gradually move towards a moderate price increase. Profit stage.
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