Will spandex price rebound after approaching bottom?

Spandex, which was hot previously, has been dim now. After reducing for more than 1.5 years, price of spandex has been close to the historic bottom. However, price of major feedstock PTMEG and MMDI was high. Spandex producers witnessed obvious losses. The operating rate of spandex plants was low. Supply of spandex 40D was tight in some companies with production curtailment. The discounts have been canceled and some enterprises slightly revised up price by 500yuan/mt. Will spandex price rebound later?

Price of spandex has gradually headed south at the end of Q1 amid strong supply and weak demand. Price of spandex 40D was mainly around 29000-31000yuan/mt now and some earlier discounted offers were lower, close to the historic low. Major feedstock cost remained high, above 4100yuan/mt higher than the previous low. Spandex companies suffered apparent losses and many cut or suspended production during the traditional off-season. Spandex capacity was stabilized at 1241.5kt/year in Chinese mainland by mid-Jun. The operating rate of spandex plants was at 79% now, hitting 6-year new low, with that of companies with above 80kt/year of capacity up to around 83% and that of small-and-medium sized enterprises at around 68%. Some small and medium-sized companies will slash or suspend production later. The capacity of spandex plants in East China was at 633.5kt/year and factories ran at around 72% of capacity. The capacity of producers in Midwest China was at 608kt/year and the average run rate of companies was at 86%.

Operating rate of downstream fabric mills has been largely stable since Jun. Domestic orders for fabric slightly weakened. Plants in Xiaoshan and Shaoxing from Zhejiang witnessed slightly growing export orders with depreciating RMB exchange rate against the USD. Currently, the operating rate of circular knitting plants in Zhejiang and Jiangsu and warp knitting mills in Haining was around 50%. Fabric mills in Haining showed apparently recovering buying interest in spandex, mostly purchasing spandex to cover 15-30 days of production. Some warp knitting plants bought spandex to guarantee production until end-Jul. The run rate of warp knitting plants and circular knitting mills in Guangdong and air covered yarn plants in Shengze, Xiaoshan and Shaoxing was mainly at 60-70% or above. The operating rate of circular knitting plants in Chaozhou and Shantou reduced when orders for domestic online sales softened. Stocks were low in local circular knitting plants and some were producing stocks during off-season. The run rate of covered yarn plants also slipped to around 60-70% and that of circular knitting plants in Foshan and lace knitting mills in Fujian was around 30%.

This year, the proportion of spandex fiber added to sunscreen fabrics, yoga underwear, and casual wear has significantly increased. Operating rate of fabric mills was medium in history when domestic demand recovered due to optimized pandemic prevention and control policies. Downstream consumption of spandex increased on the year while was not big compared with the huge expansion of spandex capacity in recent years. Supply of spandex is in apparent glut. Stocks of spandex have slightly accumulated to around 40 days. As for medium run, Jun and Aug are traditional off-season on textile market, domestic demand and export demand may both face prominently downward pressure.

Remark: above run rate is the average run rate of conventional covered yarn plants in Zhejiang, circular knitting plants in Guangdong, Zhejiang and Jiangsu, warp knitting plants in Guangdong, lace mills in Fujian and core-spun yarn plants in Zhangjiagang.

In summary, the price of spandex is still in a mid-term "bottom", and spandex factories have suffered obvious losses, with great pressure to reduce losses. When spandex can break out of the bottom or rebound, it still needs to pay close attention to changes in supply and demand. It is expected that the prices of spandex may be weak in short run but strengthen later in end-Q2 and Q3.