European VSF Market Sustains Stability, Growth Anticipated for March 2024

In February 2024, the European Viscose Staple Fibre (VSF) market displayed a steady trend, indicating a potentially bullish environment in the upcoming months amidst various market factors.

The VSF market in Germany stabilized during February 2024 after experiencing a notable decline in the preceding month. This stabilization in VSF price was attributed to favourable production costs, primarily driven by a decrease in raw material cotton prices. Although there were signs of a rebound in the current month, demand from importers, especially those from Asian countries, remained robust, showcasing the market's resilience.

Kelheim Fibres GmbH, a significant player in the German VSF market, announced a notable price increase ranging from 12% to 15% for speciality viscose fibres effective April 1, 2024. According to the company’s statement, this rise in VSF price is associated to the strong rebound in cotton fibre prices and the heightened demand for VSF, particularly in Asia. Faced with rapid rises in interest rates, wages, chemicals, and environmental costs, alongside depressed fibre prices in recent years, the company has deemed it necessary to improve margins to sustainable levels by adjusting the base price.

Additionally, according to the monthly report of Deutsche Bundesbank eurosystem published in February 2024, German economic output contracted in the fourth quarter of 2023. Real gross domestic product (GDP) fell by a seasonally adjusted 0.3% on the quarter after virtually stagnating in the first three quarters. Industry continued to be affected by weak foreign demand, with increased funding costs hindering investment and domestic demand for industrial goods and construction services. Moreover, uncertainty surrounding climate and transformation policy likely reduced investment, while adverse weather conditions constrained construction activity. However, lower inflation, a robust labour market, and strong wage growth supported real private consumption, albeit with consumers exercising caution in their expenditure.

The surge in Viscose Staple Fibre (VSF) prices is closely tied to the fluctuation in crude oil price and the ongoing Red Sea crisis, which has led to increased shipment charges, consequently affecting the overall pricing dynamics of VSF in the region. However, the positive aspect existed too, as marine freight from North Europe to East Asia saw a notable decrease of around 20% in February 2024 compared to January 2024, offering temporary relief to traders amidst these challenges.

In conclusion, according to ChemAnalyst, the VSF market may experience a bullish environment in its price in the coming months due to high demands from downstream industries. Also, the VSF, supply chain may also see improvements with reduced cost pressures and the availability of good margins in the market.