The report is divided into four parts.

In the first part, Mr. Ding first reviewed the VSF market. In 2022, VSF price rushed up before receding, showing the similar trend with in 2021, but with different driving forces. VSF price hit the new lows after the outbreak of the epidemic. Although the price increased apparently in 2020 owing to the successful epidemic prevention, the market performance after April 2021 was unsatisfactory. In terms of industry scale, the scale of VSF industry has expanded rapidly since the beginning of this century. By the end of 2021, China's VSF capacity has expanded by 10 times from 500kt/year at the beginning of this century to 5.13 million mt/year.

In the second part, Mr. Ding further analyzes the VSF market. As both feedstock side and consumer side have shrunk significantly, on the one hand, VSF producers need to pay higher prices to purchase dissolving pulp; on the other hand, it is difficult to fully transfer the cost to the downstream. Although VSF has risen by more than 3,000 yuan/mt since the beginning of this year, the profit improvement was very limited, so VSF plant operating rate dropped significantly in Aug.

In the third part, Mr. Ding discussed the VSF industry cycle. Since the beginning of the 21st century, VSF price has experienced a big cycle from strong to weak, and the cycle span is basically consistent with the Kuznets cycle. There is also a small cycle in the price with a span of 3-4 years, which basically conforms to the assumption of the Kitchin cycle. In the industry downturn, it is important to strengthen corporate resilience and innovation.

In the fourth part, Mr. Ding made a forecast for the market. View from the 10-year cycle, it may still be a low point now and in the next 1-2 years, but there are still many good development opportunities in the next 10 years. Emerging countries still have great development potential, huge consumption space, changing regional cooperation models, and considerable value potential. Energy issues may lead to leapfrog growth in new energy and cleaner production, and constrain growth in related products. Cellulose fibers are still the most renewable, degradable and sustainable fibers among existing fibers.