CITIC SEC has released a research report suggesting that the viscose filament yarn industry may enter a phase of tight supply-demand balance and rising price levels, driven by sustained export growth and near-full capacity utilization of existing facilities. The growth in traditional Indian apparel consumption has boosted China's viscose filament yarn exports, with industry export volumes rising 18.2% year-on-year to 114,000 metric tons in 2025, and further increasing 30.9% year-on-year in the first half of 2026. Meanwhile, domestic industry operating rates reached 89.8% in 2025, with semi-continuous spinning capacity potentially facing pressure from policy phase-outs, environmental upgrades, and relocations. The firm estimates a supply-demand gap of around 10,000 metric tons from 2026 to 2028, providing upward flexibility for product prices. CITIC SEC recommends focusing on leading companies.
Indian Market Expansion Driving Exports as Core Demand Growth Source
According to Baichuan Yingfu, China's viscose filament yarn exports grew 18.2% year-on-year to 113,600 metric tons in 2025, accounting for 44.4% of domestic production. In the first half of 2026, exports reached approximately 67,000 metric tons, a 30.9% year-on-year increase. Among these, China's exports to India totaled 70,200 metric tons in 2025, representing 61.8% of total exports, with India and Pakistan combined accounting for 84.2%. Indian sarees, traditional apparel, and women's fabric materials have a stable demand for fibers with high gloss and strong draping qualities. With relatively limited growth in domestic Indian viscose filament yarn supply, CITIC SEC believes Chinese companies are becoming the primary beneficiaries of incremental Indian market demand.
High Concentration and Environmental Constraints Limiting Further Supply Expansion
Per Baichuan Yingfu, China's effective viscose filament yarn capacity stands at approximately 285,000 metric tons per year in 2026, with the top two companies each holding around 110,000 metric tons of effective capacity, resulting in an industry CR2 of 78%. The industry operating rate reached 89.8% in 2025, while production in the first half of 2026 fell 2.0% year-on-year to 130,800 metric tons, indicating existing facilities are operating at high load levels. Additionally, the "Industrial Structure Adjustment Guidance Catalogue (2024 Edition)" issued by the National Development and Reform Commission has classified semi-continuous spinning viscose filament yarn production lines as elimination targets, with relocations, environmental upgrades, and potential shutdowns of existing capacity further constraining effective supply. CITIC SEC estimates the industry supply-demand gap will be around 10,000 metric tons from 2026 to 2028, with inventory and supply flexibility continuing to decline.
Tight Supply-Demand Expected to Drive Gradual Price Increases, Highlighting Earnings Flexibility for Industry Leaders
According to Baichuan Yingfu, the average market price of viscose filament yarn rose from 36,900 yuan per ton in 2020 to 43,500 yuan per ton in 2025, with prices generally exhibiting a "rise then maintain" pattern during this period. In March 2026, market prices were further raised by 1,000 yuan per ton to 44,500 yuan per ton, remaining stable thereafter. Based on a calculation with a single company's capacity of 110,000 metric tons per year, a 90% operating rate, 13% VAT, and 15% income tax rate, every 1,000 yuan per ton increase in product price is expected to boost net profit by approximately 74 million yuan. A price increase of 2,000 yuan per ton would correspond to a net profit increase of 149 million yuan. The industry's two leading companies are likely to be the primary beneficiaries of price increases and industry concentration improvements.
Investment Strategy
Both leading companies hold approximately 110,000 metric tons per year of viscose filament yarn capacity, making them direct beneficiaries of improved supply structure and product price increases. Among them, companies with higher continuous spinning ratios, more stable facility operations, and stronger export customer resources are expected to achieve greater earnings flexibility and market share expansion.
Risk Factors
Risks include overseas demand falling short of expectations, changes in export policy risks, faster-than-expected new capacity additions, slower-than-expected phase-out of backward capacity, product price increases falling short of expectations, and rising raw material and energy costs.
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