Recently, rayon yarn and fabric mills have divergences towards market expectation after Chinese Lunar New Year holiday. Besides the influence of feedstock and other manufacturing cost, exchange rate is also noteworthy. Although the industry is under pressure according to current situation, participants do not have to express more worries over post-holiday market. 

VSF price keeps firm before the holiday. Although continuous production during the holiday will lead to inventory growth, most VSF plants now have ample orders and the operating rate is lower around 80%, so the supply increment is expected to be consumed after logistics recovers, which may prop up VSF price. Meanwhile, firm feedstock will bolster rayon yarn price and sales. 

To rayon yarn mills, firm feedstock price improves the expectation towards the outlook, ensures normal restocking and reduces yarn inventory to lower level. Most rayon yarn mills reflect that post-holiday production according to orders has been well arranged and they will set for holiday for 1-4 weeks. The duration of holiday is close to that of fabric mills, so there are no worries over soaring stocks, laying good foundation for firm or even higher price of rayon yarn after the holiday. 

However, the industry operation is still under pressure like employment of workers, which is outstanding in South China including Zhejiang, Jiangsu and Guangdong. Equipment innovation, levy of environmental protection tax and exchange rate volatility may also exert impact on the market. Besides yarn exports, possible reduction of demand brought by suppression of rayon grey fabric export should be concerned as well. 

To sum up, there are uncertainties on the release of downstream demand after the holiday, but peak season could sustain for some time on rayon yarn market.