Spandex prices decrease with weak incentive from demand and cost

Sales of spandex apparently recovered in the second week after the Spring Festival holiday (Feb 14-18) when downstream buyers prepared limited spandex before holiday and downstream plants including covered yarn mills and warp knitting plants rapidly resumed operation and purchased spandex intensively. In terms of supply, new spandex plants were active in having trial production and the operating rate of existing spandex plants has ascended to above 90% now, more than 80% in early-Feb. Supply of spandex became longer. Suppliers were active in selling and snatching market share with moderate profit. Price of spandex dropped weakly.

Price: apparently declined after holiday

Price of spandex headed south weakly after the Spring Festival holiday (Jan 31-Feb 6). In the first week after holiday, price of spandex was stable when many downstream plants did not resume operation, the recovery of logistics was slow and actual trading of spandex was scarce. In the second week after holiday, spandex plants saw apparently mounting stocks as more downstream plants shut down for Spring Festival holiday than spandex producers. Spandex plants were active in selling. Price of spandex declined by 5.4% or 3,000yuan/mt from Feb 7 to Feb 18, with decrement outpacing that of other textile and apparel raw materials.

Operating rate: obviously ascended after holiday

The operating rate of spandex plants declined to above 80% in early-Feb. Some plants which suspended production due to the Spring Festival holiday or the XXIV Olympic Winter Games resumed operation after holiday. By Feb 22, the operating rate of spandex plants rose to 91%, up by 9 percentage points compared with early-Feb. Most plants in Middle China and West China ran at full capacity and plants in East China ran at above 87% of capacity now. Some plants in East China will restart later. Current operating rate of spandex plants was the second highest near the Spring Festival holiday in 2019-2022.

Inventory: inventory pressure increased

Inventory of spandex was transferred to suppliers’ hand. The highest inventory near mid-Feb increased by around half a month compared with early-Jan. The inventory of spandex slightly decreased to around 43 days after earlier stocks being consumed and fabric mills intensively purchased after holiday. Supply of spandex became longer. Buyers presented apparently cautious mindset, mainly purchasing under small lots and to cover the pressing demand.

Cost: cost support strengthened

Spandex market was under weakness in 2020 amid the outbreak of pandemic. Panic mood was strong on the market. The price gap between spandex and major raw materials was as low as 13,000yuan/mt at that time. Price of spandex declined apparently more than that of major raw materials since the end of 2021, and the price disparity has been narrowed to 16,500yuan/mt. Spandex 40D and coarse denier ones that were produced in Dec 2021 and Jan 2022 have been not profitable. The support from raw materials to price of spandex 40D and coarse denier ones will strengthen in end-Q1 and Q2. The cash flow of spandex 10D-30D was very good now. Then the price gulf between 20D and 40D may shrink further.

Price of upstream BDO rebounded after holiday. Demand for PTMEG apparently recovered in Feb and may improve further. Price of PTMEG is expected to have very small downward space in end-Q1 and early-Q2, not ruling out to rise.

Insufficient downstream orders were the major factor affecting price trend of spandex. Fabric mills saw limited big orders after the Spring Festival holiday and orders were mainly small and sporadic ones before holiday. Most fabric mills were cautious in purchasing spandex, mainly buying on a hand-to-mouth approach. Actually, fabric mills consumed scarce spandex when the production was just recovering. As a result, price of spandex accelerated falling after the Spring Festival holiday. Price of spandex 40D may reduce less than 20D and 30D supported by production cost. Overall price of spandex is expected to be hard to increase but easy to fall in short run amid high cash flow, medium-to-high inventory and great capacity expansion later. Spandex market will eye good performance in Mar-Apr by convention. However, sales of spandex may be tolerable in this Mar-Apr while price is not likely to enjoy support.