EB SECURITIES: Supply contraction combined with booming external demand, the viscose filament industry landscape is poised for a reshuffle.

EB SECURITIES released a research report stating that the supply side of the viscose filament industry is undergoing substantive clearance, further reinforcing the industry's tight balance pattern. Combined with booming overseas export demand, product prices and profit recovery have strong elasticity. It is recommended to watch Xinxiang Chemical Fiber (000949.SZ) and Jilin Chemical Fibre Stock (000420.SZ). Event: Xinxiang Chemical Fiber announced on October 9 that, affected by the paid recovery of industrial land by the local government, the viscose filament production lines in the North Zone and its subsidiaries will permanently cease production on October 12, exiting 31,200 tons/year of viscose filament capacity, with an estimated production reduction of 8,500 tons in 2026. EB SECURITIES' main views are as follows: The supply side is undergoing substantive clearance, further strengthening the industry's tight balance pattern The supply side is undergoing substantive clearance, further strengthening the industry's tight balance pattern. Viscose filament is a chemical textile material under strong policy constraints, with high domestic industry barriers. There are only four large-scale producers, with a top-three concentration ratio (CR3) of 95%, and total domestic effective operating capacity of 295,000 tons. The permanent exit of 31,200 tons of capacity this time accounts for 11% of domestic effective capacity, marking one of the larger one-time supply contractions in the industry in recent years. From January to September 2026, the industry's average operating rate was approximately 90.5%, maintaining an overall tight balance, with almost no idle backup capacity available to quickly make up for the reduction. New industry capacity is strictly restricted by energy consumption, environmental protection, and industrial policies, and the window for new capacity is basically closed. Although there are capacity replacement plans within the industry, replacement involves the entire process of environmental assessment, land, and equipment construction, with a long cycle, making it difficult to form effective output within 1-2 years. The clearance of old semi-continuous spinning capacity this time directly raises the rigidity of industry supply, weakens the basis for industry price wars, and improves the medium- to long-term industry competitive landscape. Booming external demand combined with peak-season domestic demand support, upward price elasticity is expected to increase Booming external demand combined with peak-season domestic demand support, upward price elasticity is expected to increase. The demand side of the industry shows structural characteristics of domestic demand bottoming out and exports growing rapidly, with external demand having become the core variable determining industry prosperity. According to Baiinfo, from January to August 2026, viscose filament exports increased by 20.8% year-on-year, with exports accounting for 52% of domestic production. Demand from South Asia, Southeast Asia, and other regions is strong, and overseas customers have a strong dependence on the domestic viscose filament supply chain. Domestically, the traditional Golden September and Silver October textile peak season has driven marginal recovery in downstream weaving, wedding fabric, and high-end home textile orders, providing some auxiliary support from domestic demand. Substantive supply contraction combined with peak-season demand has opened up a supply-demand gap in the industry, and upward price elasticity for viscose filament is expected to increase. Global supply is highly anchored to domestic production, and capacity contraction is expected to accelerate the concentration of overseas orders toward leading players Global supply is highly anchored to domestic production, and capacity contraction is expected to accelerate the concentration of overseas orders toward leading players. Global viscose filament capacity is highly concentrated in China, with limited effective overseas local capacity and difficulty in quickly building new facilities, so global supply is basically determined by domestic capacity. This domestic capacity contraction will indirectly change the supply-demand structure of global trade. In recent years, the competitiveness of domestic viscose filament exports has continued to strengthen, relying on scale, processes, and supply chain support to seize overseas market share. Against the backdrop of domestic supply contraction, the sources available to overseas buyers will further narrow, and their dependence on domestic sources is expected to increase further. Existing capacity enterprises have the opportunity to take over overseas orders that flow out, and the export structure is expected to further concentrate toward leading enterprises. Optimization of the supply-demand pattern opens up room for profit recovery, and the industry's core contradiction shifts to a game between rigid supply and demand Optimization of the supply-demand pattern opens up room for profit recovery, and the industry's core contradiction shifts to a game between rigid supply and demand. Under the background of supply-demand pattern optimization, all existing operating capacity in the industry can enjoy gross margin recovery brought by product price increases, and the industry's overall profit center has a basis for elevation. At the same time, this event also exposes a common industry risk: old production lines built in earlier periods face passive exit risks brought by urban planning adjustments, land reserve, and environmental protection upgrades. In the future, domestic viscose filament industry capacity will most likely maintain the general direction of marginal contraction. The industry's core contradiction has already shifted. In the past, the main contradiction in the industry was capacity competition among domestic enterprises. Going forward, the main contradiction will transform into a game between rigid supply constraints and cyclical fluctuations in domestic and external demand. Follow-up tracking should focus on one hand on the actual progress of replacement capacity landing, and on the other hand on the sustainability of overseas orders, as well as the implementation of cost pass-through in the downstream textile industry. [Investment Advice] The supply side of the viscose filament industry is undergoing substantive clearance, further reinforcing the industry's tight balance pattern. Combined with booming overseas export demand, product prices and profit recovery have strong elasticity. It is recommended to watch Xinxiang Chemical Fiber (000949.SZ) and Jilin Chemical Fibre Stock (000420.SZ). [Risk Warnings] Risk of downstream textile terminal demand recovery falling short of expectations; risk of overseas external demand decline, international trade frictions, and exchange rate fluctuations; risk of overseas capacity release exceeding expectations and impacting the domestic export market.