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Spandex market witnesses diversified performances

2022-03-23 07:57:37 CCFGroup

Prices of many commodities soared amid intensified Russia-Ukraine conflict. Prices of major raw material of spandex, PTMEG, rose by 1,000-3,000yuan/mt in Mar and the nomination price of MMDI also increased by 3,000yuan/mt. Offers of spandex 35D-70D moved up by 2,000yuan/mt in early-Mar and the actual trading price slightly chased up. Sellers were active in selling spandex 10D-30D. Spandex market presented diversified appearances among different Denier, why?

Price: different decrement

According to the production proportion of spandex by varieties, 40D accounted for 40-50% of the total. Price of 40D remained weak from the fourth quarter of 2021 to Feb 2022. Price of spandex 40D reduced more than 20D and 30D. However, after price of spandex 40D reduced to 51,000-54,000yuan/mt and inventory being digested, price of spandex 40D took a lead in rebounding after demand turned better, mainly at 52,000-54,000yuan/mt now.

Price change of major spandex
Date	20D	30D	40D
21-09-01	104000	91000	78500
22-03-10	72000	63000	53000
Change (yuan/mt)	-32000	-28000	-25500
Change (%)	-30.80%	-30.80%	-32.50%

Operation change: Operating rate change and production cut

The production of spandex plants was affected by the Dual Control of energy consumption and the Winter Olympics since the fourth quarter of 2021. Coupled with collapsing price of spandex in the second half of Q4 2021, 40D and medium-to-coarse denier spandex was close to the break-even line. Some suppliers even suffered losses. Under such circumstance, some plants scaled down the production of 35D and 40D which was applied in Dralon fabrics, super-soft fabrics and knitted velvet but saw fading demand earlier than other varieties. Supply of 35D and 40D apparently decreased. However, as 20D and 30D was during peak season and the cash flow was high, their production curtailment was very limited.

Cash flow: 20D>30D>40D, shrink on the whole

In terms of the cash flow of major spandex since 2020, the cash flow tended to increase after denier became finer. Current cash flow of 40D was low and 40D was even unprofitable after calculated into financial cost and depreciation and so on. The cash flow of 30D was near 10,000yuan/mt and that of 20D was above 15,000yuan/mt now. Spandex industry saw obviously shrinking cash flow compared with last year but the profit remained moderate now. Producers of spandex 35D-70D encountered bigger cost pressure with firm PTMEG and MMDI price and many strongly intended to raise price.

Operating rate of fabric mills: ascends but lower than the same period of last year

The geopolitical issue will exert unpredictable influence on the textiles and apparels market. Prices of oil, chemicals (including PTA, MEG and benzene), polyester fiber and nylon fiber climbed up to high level after the Lunar New Year’s holiday. As a result, buyers both domestically and abroad were cautious in placing orders. Most fabric mills focused on delivering orders taken before the Lunar New Year’s holiday. New orders were small and sporadic. In addition, some orders for textiles and apparels flew back to Southeast Asia after the spread of pandemic was better controlled, which disfavored domestic fabric mills.

Current operating rate of fabric mills was around 10 percentage points lower than the same period of last lunar calendar year but was increasing now. The operating rate of air covered yarn plants, cotton core-spun yarn producers and warp knitting mills was at 60-70% now, that of circular knitting plants in Zhejiang, Jiangsu and Chaozhou and Shantou of Guangdong, and the conventional covered yarn plants advanced to 40-50% or above and that of lace knitting plants in Fujian and circular knitting plants in Foshan, Guangdong ascended to above 30%.

Most fabric mills increased purchasing spandex 35D-70D after the Lunar New Year’s holiday but still mainly purchased 20D and finer denier spandex on a hand-to-mouth approach.

Operating rate of downstream fabric mills
Market	Region	2021-3-20	2022-2-28	2022-3-10	YOY change	MOM change
Covered yarn plants	Zhuji and Yiwu	60%	44%	52%	-8%	8%
	Zhangjiagang	70%	60%	60%	-10%	0%
	Xiaoshan and Shaoxing	74%	64%	65%	-9%	1%
Circular knitting plants	Foshan	52%	32%	32%	-20%	0%
	Xiaoshan and Shaoxing	54%	48%	50%	-4%	2%
	Changshu	53%	45%	48%	-5%	3%
Warp knitting mills	Guangdong	70%	62%	67%	-3%	5%
Warp knitting mills	Haining	85%	54%	58%	-27%	4%
Lace knitting plants	Fujian	39%	32%	32%	-7%	0%
Average		61.9%	49.0%	51.6%	-10.3%	2.6%

Remark: Mar 10, 2022 was the 8th day of the 2nd lunar month of 2022 and Mar 20, 2021 was the 8th day of the 2nd lunar month of 2021.

Market trend

As for the trend, spandex industry will see capacity expansion peak in 2022. The growth rate of demand may be hard to chase up that of supply. Price of spandex is likely to reduce in 2022. However, prices of spandex 35D-70D are expected to stop falling and rebound weakly in Mar-Apr (traditional peak season) when demand may recover and prices of raw materials climb up. Price of PTMEG is estimated to be strong when spandex capacity is scheduled to expand greatly. Therefore, the cost support to spandex 35D-70D will sustain strong. Suppliers may focus on selling 20D and fine denier ones and 30D as the new capacity is big while downstream single-faced circular knitting market improves limitedly. The price spread between 20D and 40D is estimated to keep narrowing later.

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