New supply has time gap on PTMEG and spandex market

After Hyosung Ningxia's PTMEG unit started operation at the beginning of 2023, there was no new capacity for eight months in 2023. One 60kt/year of PTMEG plant even suspended production in Q2 2023 amid cost pressure. However, the new capacity of spandex was intensively released on spandex market. There was an apparent gap in terms of the supply capability on upstream and downstream market. As a result, supply of PTMEG sustains tight.

There is an obvious time gap between the startup of new units on PTMEG and spandex market in 2023. New spandex plants intensively commissioned operation in Q1 2023, with new capacity at around 150kt. The launch of new spandex plants is slower with pressure from supply, demand and price. Some new spandex units are scheduled to be put into production in Q4 2023. In the first half of 2023, new PTMEG capacity basically offset the offline one. That meant there was no effective supply released on PTMEG market. Most new PTMEG plants are scheduled to start production in end-Q3 and Q4. Effective supply of PTMEG is estimated to intensively increase near end-Q4. Most new spandex plants were put into production in Q1 while most new PTMEG plants are expected to start operation in end-Q3 and Q4. Therefore, there is a big time difference in terms of new supply.

Domestic demand for spandex recovered to be normal after the Spring Festival holiday in 2023. Spandex plants ran stably after capacity expanded. The operating rate of downstream fabric mills also indicated stably growing demand for spandex. Supported by the operating rate of spandex plants, demand for PTMEG apparently improved too. Supply of PTMEG has remained tight in mainstream plants after Q2. Some were forced to choose automobile transport with high charge but faster speed.

The operating rate of spandex plants was low in Jan 2023, lower than 80% in May due to intensive turnaround and returned to above 80% and remained steady after Jul. The run rate of PTMEG units kept high. More PTMEG units started scheduled turnaround from Apr. The run rate of PTMEG plants was below 90% from May as some units suspended or cut production. If excluding the effect of production suspension and curtailment, the operating rate of PTMEG plants was also at 90% or above after Jun.

Although supply of PTMEG sustained tight from Q2, the price of PTMEG rose slowly, meeting resistance to move up as downstream buyers strongly resisted. It was mainly because the competition on spandex market escalates. Some spandex varieties became unprofitable and spandex plants who saw high cost suffered losses.

Some producers of spandex 40D with high production efficiency still saw minor profit in May, while most have been under losses. PTMEG producers gained profit supported by supply and demand. As a result, price of PTMEG was able to increase but the actual increase was slow when spandex market met difficulty in transferring cost.

The capacity expansion on PTMEG market will start. Around 76kt/year of capacity is able to start operation in Sep. Oct and Nov are expected to see 46kt/year of new capacity respectively. In end-2023 and early-2024, around 60-120kt/year of capacity is scheduled to be put into production. There will be new capacity in early-Q2, 2024. Although supply of PTMEG is expected to be in crunch in short run, the tightness is anticipated to be gradually eased near end-Q4, 2023.