Spandex market in dilemma: weakening demand but excessive supply

Spandex prices plummeted in 2022 mainly due to the divergence between supply and demand.

The launch of new projects accelerates stimulated by soaring price in 2021. New spandex capacity is estimated to be 250kt in 2022, with y-o-y growth rate at 26%. Spandex capacity has been expanded by 90kt in the first half of 2022, up by 9.3% over 2021. There will be 160kt of capacity to be expanded in the second half of year.

As for demand, according to the data from CCFGroup, consumption of spandex (domestic demand increase +net export) was at 110-120kt in 2020-2021 under high prosperity, while the consumption was at 70-80kt in 2018-2019.

250kt of yearly capacity increase was apparently bigger than downstream consuming capability.

Impacted by the pandemic and fading demand expectation, downstream fabric mills did not perform well in the first half of year.

Remark: above data was by Jun 20. The operating rate is a weighted average of warp knitting, circular knitting and covered yarn plants and weaving plants

Comprehensive operating rate of fabric mills was around 49% in the first half of 2022, only around 5 percentage points higher over H1 2020 when the spread of pandemic began, down by 17 percentage points over 2021. Although downstream capacity expanded in 2021, the actual consuming capability of fabric mills descended.

With reducing prices, traders and fabric mills did not need to replenish spandex. That meant mounting stocks in spandex producers.

Low operating rate on fabric market was partly due to the regulation of pandemic prevention and control and partly because of feeble terminal demand. Some factories were not able to run normally from Mar.

Exports of textiles and apparels amounted to US$124 billion in Jan-May, 2022, up by around 10% over the corresponding period of last year. The increase of quantity seemed to be very limited after eliminating the rise of price.

However, domestic retail sales did not perform well.

According to the data from the NBS, domestic retail sales of apparels, shoes, hats and knitted textiles totaled around 509.3 billion Yuan in Jan-May, 2022, a year-on-year decrease of 8.1% and down by 6.7% from 2019. Domestic retail was obviously impacted by the pandemic and may apparently improve in Jun with eased pandemic, which will favor the destocking of apparels.

Spandex market witnesses capacity expansion peak. Supply sees rapid growth rate while demand is hard to keep strong upward momentum as 2021 and is difficult to chase up the growth rate of supply. Demand is expected to rebound in the second half of 2022 while mild demand will be hard to bear such big expansion.