August spandex market expected to be in range-bound

In Jul, spandex market enjoys support from the high feedstock cost but the rigid demand for spandex weakens when some fabric mills slowly slash run rate with inadequate orders and mounting inventory. Some buyers focus on digesting spandex prepared before. Spandex suppliers witness apparently shrinking sales in Jul over last month. Price of spandex shivers near the bottom. In the first half of Jul, spandex price was largely stable but slightly reduce in late-Jul.

Cost: support from cost side remains strong

Major feedstock cost of spandex keeps strengthening in Jul. PTMEG sellers strongly intend to raise price boosted by strong demand and price of PTMEG slightly rises. Price of spot MMDI also slightly advances. By Jul 26, price of spot MMDI was at 19900yuan/mt, up by 800yuan/mt compared with early-Jul. The settlement price of mainstream suppliers in end-Jul should be noted.

Current major feedstock cost of spandex is near 19000yuan/mt, around 3300yuan/mt higher than the historic low. Current selling price of spandex 40D was only around 2200yuan/mt higher than the historic bottom. Most spandex companies suffer apparent losses now, excluding some leading companies and enterprises with integrated industrial chain.

Supply: operating rate increased at first and then inches down in Jul

Spandex capacity is flat at 1211.5kt/year in Chinese mainland by the end of Jul in 2023, up 14.1% year on year, which increases by 115kt/year compared with early-2023 after combined the new capacity and eliminated one. Operating rate of spandex plants is low compared with the same period of previous years constrained by hard-to-rise demand, tight raw material and heavy losses, which was at 79% by Jul 26, at 81% in large companies and at 74% in small-and-medium-sized companies. Supply of spandex has apparently climbed up in Jul over end-Q2.  

Demand: rigid demand turns muted during traditional off-season

The divergence between supply and demand enlarges recently on spandex market. Operating rate of fabric mills decreases and rigid demand for spandex turns slower. Some buyers are still consuming spandex prepared before. Spandex suppliers see increasing selling pressure in Jul. By Jul 26, the stocks of spandex have accumulated by around 5.4 days to 39 days over end-Jun. Buyers show sidelined attitude toward spandex market and only purchase to cover the pressing demand.

Operating rate of fabric mills declines in Jul during the traditional dull season. Operating rate of covered yarn plants inches down to around 60% and covered yarn plants face slower sales during off-season. The run rate of circular knitting plants is at 40-50% in Zhejiang and Jiangsu, at 20-30% for plants in Foshan, Guangdong and above 60% for plants in Chaozhou and Shantou from Guangdong. Single-faced machine mainly produces milk yarn and printed fabrics. The production of double-faced fabrics is relatively better but large orders are insufficient and plants mainly manufacture thermal fabrics like dralon fabrics. Operating rate of warp knitting mills is high, mainly around 60-70%. The run rate of warp knitting plants is above 70% in Guangdong and factories focus on producing polyester/spandex fabrics for swimwear and polyester dull plain fabrics which occupy less capital. The run rate of warp knitting plants is near 60% in Haining.

In 2018-2022, operating rate of fabric mills in Aug all improved over Jul, excluding 2018 and 2021. The orders change of fabric mills should be concerned later.

Market outlook

Spandex capacity continues expanding in Chinese mainland in recent three years, while the growth of demand fails to chase up quickly. Supply glut is obvious on spandex market. Spandex market is expected to enjoy strong support from cost side in short run, and price of spandex may be hard to plunge coupled with pressure from losses. As overseas demand for textiles and apparels is sluggish and spandex market is oversupplied, price of spandex is expected to largely consolidate near the bottom in Aug, that of varieties with stagnated sales and apparently mounting inventory is likely to be discounted and that of tight varieties is estimated to be firm.