Spandex price decreases sporadically with weaker demand –
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Spandex price decreases sporadically with weaker demand

2020-12-18 08:19:53 CCFGroup

Recently, rigid demand for spandex turned muted after downstream plants witnessed diminishing orders and slightly cut run rate. Some dealers also reduced replenishing. Supply tightness of spandex has been eased slightly and stocks started mounting, while overall stocks on spandex market remained low. Price of some spandex 20D and 30D was high boosted by seasonal demand, while that of 40D/70D/140D inched down amid falling orders. Price of spandex hiked by around 40% compared with the bottom level and started shivering at high level in Dec, even moving down in some regions. Did the market fundamental change?

Price of spandex in Dec 2020 (Unit: yuan/mt)
Date 20D 30D 40D 70D 140D
1-Dec 46500 45500 38500 38200 37500
15-Dec 46500 45500 38300 38000 37000
Change 0 0 -200 -200 -500

In view of supply, spandex market entered prosperous cycle after Q3 with soaring price and greatly improving profit. Most units kept running at high capacity, excluding some old units to be eliminated. Current operating rate of spandex market was at 93% and is supposed to remain high in Dec supported by low stocks and high cash flow. Monthly production of spandex may hit yearly high in Dec.

Production cost of spandex market apparently ascended but the increment was smaller than that of spandex. Cash flow of spandex market continued increasing in Aug-Nov. In Dec, price of PTMEG rose more amid high price of upstream BDO and cash flow losses, with increment mainly at 2,500yuan/mt and even as high as 3,000-4,000yuan/mt, which is expected to move up further in later period. However, weaker downstream market and falling sales ratio forced some spandex plants to slightly revise down price, focusing on 40D-140D. Slight discounts were available for large customers. High cash flow of spandex market inched down.

Demand for spandex tends to weaken and sales were mainly driven by rigid demand now. Operating rate of spandex downstream mills accumulated to historic high in Sep-Nov as local and export orders for thermal fabrics, fabrics for sportswear, yoga clothes and bedding etc. were hot. However, mills concentrated on delivering in Nov, but orders for spring wear and summer wear failed to chase up sufficiently. Some fabric mills turned to hoard up stocks, and some adjusted down run rate amid high stocks. Some mills replenished thick fabric after the online shopping spree in Nov.

Operating rate of spandex downstream mills gradually slipped since mid-Dec, with that of circular knitting plants, lace knitting mills, cotton core-spun plants and conventional covered yarn plants at around 50-60% and that of warp knitting and air covered yarn plants at around 70-80%. Current run rate of downstream mills dipped but was still higher than past years amid low stocks. Orders weakened, while orders for fabrics for home textiles kept moderate. Production of circular knitting light fabric and fine covered yarn grew.

All in all, operating rate of spandex market is expected to remain high in Dec, and the supply will touch yearly high, but demand tends to diminish temporarily. The diversification between supply and demand is likely to enlarge. Supply of spandex is estimated to gradually become normal and the delivery of substantially less varieties will need to queue. Trading under high price and small lots is supposed to reduce. Price is anticipated to be negotiable for some large lots.