Spandex price may rally with shrinking supply/demand gap

Spandex price has shivered near bottom for around two months and may welcome a rallying in medium run near the traditional peak season when there is strong support from supply and cost sides and unstable factors turn weaker.

As for the price trend from early-Aug to end-Oct in recent decade, the appearance between ups and downs was basically 50%:50%. The average price gap between end-Sep and early-Aug was at 70yuan/mt and that between end-Oct and early-Aug was at 740yuan/mt. With shrinking gap between supply and demand, the price of spandex is likely to rebound later.

The capacity expansion on spandex market was mainly intensive in the first half of 2023 and the increase of new capacity will reduce in the second half of year. The launch of new PTMEG units may be slow in the second half of 2023 but the startup of new spandex units and the raise of run rate in existing spandex plants may be constrained by tight feedstock. Once the peak season comes and the demand is released, tight supply of spandex is likely to last for a long period.

By early-Aug 2023, the spandex capacity was at 1211.5kt/year in Chinese mainland, up by 115kt over end-2022. New spandex capacity was at 160kt/year in H1 2023 and 45kt/year of capacity was eliminated. Therefore, the actual capacity rose by 115kt/year in H1 2023 and new capacity is estimated to be 72kt in the second half of year. Affected by the problems such as tight feedstock supply, the actual supply of spandex may increase limitedly.

Spandex industry suffered apparent losses. Some leading companies were hard to turn to be profitable coupled with the costs of depreciation and financing. Some leading spandex enterprises and companies with integrated industrial chain saw some net profit year to date, while most spandex companies were in predicament. Some have seen losses for around 9 months. Spandex suppliers show apparently stronger intention to raise price to reduce losses when many have suffered losses for long and demand may improve in the coming traditional peak season.

The influence of some unstable factors may weaken in short run. Supply of some brands was tight. It was heard that some spandex supplier in Zhejiang raised the selling price of spandex 40D by 3000yuan/mt from 26500yuan/mt for earlier large orders to current 29000-30000yuan/mt. With higher cost and tight supply, earlier discounts were canceled.

In summary, most new spandex units in 2023 have started operation in the first half of year, and the launch of new units in the second half of year may be not fast restricted by tight feedstock. The raise of run rate in existing plants is also constrained by tight PTMEG supply. Price of MMDI and PTMEG both climbs up. The support from cost side strengthens on spandex market. Most spandex suppliers are eager to reduce losses with ongoing deficit. In addition, demand is estimated to grow with the coming of peak season. Therefore, the gap between supply and demand is expected to narrow on spandex market. Price of spandex is estimated to be firm in medium run, which may welcome a round of rallying.