Affected by constraints such as epidemic prevention and control, shortage of dissolving pulp, rising basic chemical materials, and inability to effectively transmit prices to downstream, the output of viscose staple fiber is expected to be around 1.87 million tons in the first half of this year, and the operating rate in the first half of the year is approximately 69.26%; The price of viscose staple fiber increased from 12,200 yuan/ton at the beginning of the year to 15,700 yuan/ton, an increase of 28.69%. As epidemic prevention and control becomes more and more precise, it is expected that the operating rate of downstream viscose staple fiber enterprises will gradually increase in the third and fourth quarters, and the logic of product price increases may change from upstream cost-driven to downstream demand-pushed.
01 Review of operations in the first half of the year
Four factors lead to sluggish industry operating rates
From January to June this year, domestic viscose staple fiber production capacity remained unchanged at 5.4 million tons at the end of 2021. No new production capacity has been opened in the industry. From January to June, industry output is expected to be around 1.87 million tons. The operating rate in the first half of the year is roughly 69.26%. The main reasons for the low operating rate of the industry are:
The uncertainty of the epidemic has caused fluctuations in the operating rate of viscose staple fiber factories. From January to May, due to the escalation of epidemic prevention and control in various places, especially from March to April, after the escalation of epidemic prevention and control, transportation was restricted in many places across the country. Due to restricted transportation and hindered logistics circulation, the industrial chain in the industry has been fragmented. This situation has affected the procurement of raw materials for viscose staple fiber factories on the one hand, and the delivery of finished viscose staple fiber on the other. . Under this situation, viscose staple fiber factories had to take measures to limit or suspend production. At this stage, factories such as Jilin Chemical Fiber and Sateri (Yancheng) suspended production, while companies such as Tangshan Sanyou, Shandong Hailong, and Shandong Yamei Production has been restricted for a long time.
Dissolving pulp supply is tight and prices are rising. More than 87% of my country’s dissolving pulp relies on imports. This situation is not conducive to the security of the industrial chain of my country’s viscose staple fiber industry, and it is easily restricted by the product supply of foreign pulp mills. After the conflict between Russia and Ukraine this year, this issue was completely exposed. After the Russia-Ukraine conflict, the European market has experienced two major crises in the dissolving pulp sector: one is the energy crisis, and the other is the wood chip crisis. The energy crisis was mainly due to natural gas. Due to the EU’s sanctions on Russia, the price of natural gas in Europe eventually rose by more than five times, causing a significant increase in the manufacturing costs of European paper pulp plants and dissolving pulp plants.
In addition, due to the escalating EU sanctions against Russia, the EU prohibits its members from trading wood chips with Russia, causing a shortage of wood chips in pulp mills within the EU system. Sources pointed out that without Russian wood chips, the production capacity of European pulp manufacturers, especially Denmark, Norway, Sweden and other countries, will be curbed. This will ultimately lead to a reduction in global pulp and dissolving pulp inventories, with supply disruptions likely to occur at any time.
In addition to the European dissolving pulp supply crisis caused by EU sanctions on Russia, the production of the two major dissolving pulp plants in South Africa and Chile was also unstable in the first half of this year, which also affected the global dissolving pulp supply.
In China, although Sun Paper and Juntai Paper increased their dissolving pulp production capacity in the second quarter, they were unable to effectively solve the problem of pulp shortage in the domestic viscose staple fiber industry chain. Especially when the pulp boom is relatively good, the power of domestic dissolving pulp mills to produce paper pulp is much greater than that of dissolving pulp. This is mainly because most domestic dissolving pulp factories need to import wood chips from overseas, and the price of imported wood chips has remained at a high level in the past two years. From the perspective of operating efficiency, dissolving pulp factories are not willing to import wood chips for production with a higher break-even point. Dissolving pulp. According to the estimates of most domestic dissolving pulp factories, the break-even point of dissolving pulp this year is 7,500-8,200 yuan/ton, which is much higher than the break-even point of paper pulp. From the perspective of economic benefits, although domestic dissolving pulp factories have the ability to produce dissolving pulp capacity, but in order to maintain their own profits, most dissolving pulp mills choose to produce paper pulp.
In the case of low domestic dissolving pulp production abroad, the price of dissolving pulp climbed from 8,000 yuan/ton to 9,400 yuan/ton in the second quarter. Viscose staple fiber factories that are accustomed to low-priced dissolving pulp have difficulty finding cheap sources of dissolving pulp in the market, so they have to choose to reduce their operating rates.
The cost of chemical excipients is rising. From January to June, the price of caustic soda remained at a high level of 1,100 to 1,300 yuan/ton, and the price of carbon disulfide was also close to 6,000 yuan/ton. Because these chemicals are at historically high levels, and at the same time, during the epidemic, the transportation control of chemical products is more stringent than usual, which puts most viscose staple fiber factories in a state of high production costs and tight supply of raw materials. Facing the production situation with increasing uncertainty, most viscose staple fiber factories in the mainland have actively chosen to reduce their operating rates.
Rayon yarn factories have limited acceptance of high-priced viscose staple fiber. According to observations from March to June, the price of viscose staple fiber rose from 13,800 yuan/ton to 15,600 yuan/ton, with room for growth of 1,800 yuan/ton, while the price of rayon ring-spun 30S rose from 18,000 yuan/ton. To 18,700 yuan/ton, the upside potential is only 700 yuan/ton. The limited room for growth in rayon yarn is mainly due to the fact that it is difficult for rayon yarn to transmit prices to downstream rayon fabric links, resulting in rayon yarn factories being inactive in acquiring viscose staple fiber with rising prices. When viscose staple fiber factories saw that price transmission was difficult, they also solved their operating difficulties by “limiting production and ensuring prices.”
The logic of price increases has quietly changed
The price of viscose staple fiber from January to June this year increased from 1220�� Prices are rising. By the end of June, the price of cotton was 19,000 yuan/ton, and the price of viscose staple fiber was 15,700 yuan/ton. The price difference between the two was 3,300 yuan/ton. The price has entered a reasonable price of 3,500 yuan/ton. price range.
There are many speculations about the cotton market price in the second half of the year, especially on June 24, when the price of the main cotton futures contract fell below 17,000 yuan/ton, and the market debate on the trend of cotton futures prices became more intense. Since October and November are the cotton harvesting seasons, before the cotton purchase, most people believe that cotton prices are expected to remain around 18,000-18,600 yuan/ton. If cotton prices can remain at this price, there is still room for viscose staple fiber to continue to rise. At the same time, as several factors affecting the operation of dissolving pulp are difficult to change in the third quarter, it is normal market logic for viscose staple fiber to move from 15,700 yuan/ton to 18,600 yuan/ton. At the end of the third quarter and the beginning of the fourth quarter, it is likely that the price of viscose staple fiber will be higher than that of cotton.
Dissolving pulp may still maintain an upward trend
The cost of viscose staple fiber mainly depends on the price increase of dissolving pulp and chemical auxiliary materials. Judging from the situation in the first half of the year, the tight volume of dissolving pulp and the high price have provided some reference for the operation of the dissolving pulp market in the second half of the year. Of course, most operators in the viscose staple fiber industry believe that the supply of dissolving pulp in the second half of the year will be better than that in the first half. However, judging from the actual situation, when the current price of domestic dissolving pulp is 9,400 yuan/ton, the operating rate of domestic dissolving pulp plants is still less than 60%, which means that the economic benefits of multiple product varieties of domestic dissolving pulp plants are still limited. The increase in dissolving pulp volume in the second half of the year mainly depends on two major factors: an increase in the domestic dissolving pulp operating rate and smooth international dissolving pulp import channels. However, judging from the current status of the industry at the end of June, it will be difficult to solve the above two major problems in the third quarter. Therefore, dissolving pulp still maintains an upward trend in the third quarter. In this case, viscose staple fiber operators need to make plans for relevant raw material procurement to ensure that the company’s operating costs are controllable.
Strengthen industrial chain collaboration to cope with order fluctuations
At the end of June, the situation faced by the viscose staple fiber industry chain is roughly as follows: the prices of the two major links of dissolving pulp and viscose staple fiber have risen too fast, the price of the yarn link has risen relatively slowly, and the operating rate of gray fabrics or downstream knitted fabrics has been sluggish. In this case, if the operating rate of gray cloth and other downstream industries does not improve, it is very easy for yarn mills to sell viscose staple fiber. At the same time, the operating rate of yarn mills will also change. However, if the downstream gray fabric or circular knitting machine factory believes that the spinning mill is destocking due to the reduction in the operating rate of the spinning mill, it will start to prepare yarn inventory, or increase its own operating rate to consume yarn. The healthy supply and demand relationship in all links of the industrial chain will be affected.
Judging from the downstream operating rate, as of the end of June, the operating rate in Nantong was 42% to 45%, the operating rate of Guangdong circular knitting machines was 10% to 12%, and the operating rate in Xiaoshao was 45% to 49%. June’s data was slightly better than May’s data, but it did not reach a complete reversal. However, as epidemic prevention and control becomes more and more precise, it is believed that the downstream operating rate will gradually increase in the third and fourth quarters. The market is expected to see an increase in downstream volume in the second half of the year, which will provide strong support for rising prices in links such as viscose staple fiber and rayon yarn, thereby transforming the logic of this round of price increases from upstream price-driven to downstream demand-driven. Judging from the magnitude and timing of price increases for viscose staple fiber and dissolving pulp in June, this change is taking place.
What needs attention is that in July, due to the seasonal change of textile finished products, there will be fewer orders, and the yarn market transaction volume will decrease. However, in August-September, as orders in the second half of the year will gradually flow into the market, the market operation situation at this time Starting to get better. Therefore, viscose staple fiber factories may face the challenge of reduced orders in July. At that time, viscose staple fiber, downstream rayon yarn and other links need to remain stable in the off-season, maintain the operating conditions at the end of June, and strengthen industrial chain collaboration. Strengthen our beliefs and jointly cope with the adverse effects of reduced orders. At the same time, make relevant preparations before business recovery in August and September.
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