For Grasim, VSF demand a yo-yo

Demand for viscose staple fibre (VSF), the versatile ‘cotton duplicate’ made by man from pulp, and used to make apparel and textiles, have rarely been so volatile and things don’t seem different going forward either.

“Suddenly you have buyers, suddenly you don’t,” is how K K Maheshwari, head of pulp and fibre business at the Aditya Birla Group, explains the phenomenon.

“Earlier, the demand cycles used to be longer, such as for one to two years. Nowadays, it has reduced to 15 days or a month. There is sudden enthusiasm from nowhere,” he says, sounding mystified.

Ashish Jain, analyst with Morgan Stanley, said in a note on Wednesday that the demand environment has been the toughest in the last 25-30 years given the volatility.

‘While end-consumer demand in the US and China has held up, behaviour in the value chain has been dynamic, leading to significant volatility in monthly volumes. This will continue in the near term,” Jain said.

Not surprisingly, sales volumes at Grasim, the global leader from the Birla Group, reflect the trend. Volumes have declined 8% from 84,620 million tonne in the December quarter of last fiscal to 78,215 mt in this fiscal same quarter.

At the global level, VSF prices have declined close to 8% in the third quarter sequentially. Maheshwari said domestic prices have been flattish at `120 per kg.

Till the global uncertainty clears, the fibres of demand will remain frayed, said another analyst. “The long-term outlook is good. Price movement is also due to correction in other fibres such as cotton and polyester. The current cotton season is expected to be good, which will impact VSF prices again,” he said.