European VSF Prices Show Resiliency, Decline in APAC

Hamburg (Germany): In April 2024, there was a significant decrease in the Global Viscose Stable Fibre (VSF) market, primarily due to factors originating from downstream industries. These downstream sectors include textiles, apparel, non-woven fabrics, and others, where VSF serves as a crucial raw material. The decline in the VSF market can be linked to a decrease in demand from these downstream industries, leading to reduced offtakes.

In April 2024, the European VSF market remained stable, with Germany's VSF prices showing a balanced trend. However, the overall VSF market experienced a downward trend throughout the month. This was in contrast to March when the VSF market in Germany saw a significant increase, with prices rising by over 3.1%, mirroring a similar uptick in caustic soda prices. Despite these price increases, the German VSF market faced challenges due to weak demand from VSF-reliant industries. This led to a notable decrease in production output, the most significant in over three years. Additionally, there was a decline in new orders, indicating market uncertainty. While some companies reduced their workforce to adapt, many were hesitant to make significant staff cuts.

In the Asia-Pacific region, the VSF prices experienced a bearish trend in April, with Chinese market prices dropping by approximately 5%. This decline was primarily due to reduced demand from domestic downstream sectors, resulting in a relatively stagnant market for VSF and minimal demand for downstream rayon yarn. Yarn companies only placed sporadic small orders to replenish their supplies, focusing primarily on fulfilling early orders to maintain market stability. On the other hand, prices of feedstock wood pulp in the Chinese market increased due to rising demand from the paper mill industry in the early part of the month.

Moreover, the export of rayon yarn witnessed a significant decrease, with a year-on-year decline of 29%. Export volume reached a 7-year low in January and February, largely driven by a drastic drop in exports to India, which fell by 95% from its peak, according to customs data. However, there was a notable year-on-year increase of 12.8% in exports of technical textiles from China, amounting to USD 6.49 billion in the first two months of 2024. Conversely, imports of technical textiles into China decreased by 10.1% during the same period compared to the previous year.

In conclusion, VSF prices are anticipated to continue decrease in both regions due to decreased demand from the textile and apparel industries. Additionally, the expectation is for further decline as feedstock wood pulp prices are expected to remain bearish limiting the cost support for the VSF prices.