Spandex price extends higher with strong demand

Spandex market shifted into low capacity expansion cycle in recent 2 years, while demand recovered substantially. In post-pandemic era, hot personal protective equipment like protective clothes and mask used spandex as one of the raw materials. Sales of fabrics for sportswear, yoga clothes and stretch fabric performed well. Exports of textiles and apparels extended strong and demand for spandex was tolerable outside China. Supply of conventional spandex (20D-30D-40D) was short. Price of spandex has surged by around 70% year to date, far higher than other major raw material on textiles market. 

1. Spandex capacity grew slowly and new units are scheduled to commission production intensively in the second half of 2021

Spandex capacity amounted to 0.85 million tons/year in Chinese mainland by the end of 2019 and increased by 2.6% to 0.872 million tons in 2020, which may rise by 6.9% or 60kt by the end of 2021. The annual growth rate of spandex capacity was only near 4.7% in recent 2 years, not high. 

Zhuji Huahai and Chongqing Huafon’s new spandex units are expected to start releasing production to the market in the third and fourth quarter of 2021. Products from Xinxiang Chemical Fiber, Tayho New Material and Ningxia Hyosung are anticipated to be launched by the end of 2021 or in the first half of 2022. The production contributed by the new units that started operation in 2021 would be limited this year, and growing spandex production will be mainly stimulated by lifting run rate of old units. 

2. Downstream demand is hot

Operating rate of downstream fabric mills kept high despite of slight reduction compared with the level in Q4 2020. Operating rate of circular knitting plants in Zhejiang, Jiangsu and Guangdong, lace knitting plants in Fujian, braid mills in Guangdong, warp knitting plants in Guangdong was at 30-60% and that of covered yarn plants and warp knitting mills in Haining was at 70-80%. Operating rate of some circular knitting and warp knitting plants dipped slightly in Guangdong due to the policy of electricity consumption limit.

High-density circular knitting machine and low-end warp knitting machine has apparently advanced. There is new exploration in spandex products and spandex content too. The content of spandex was as high as 18-25% in some high-end yoga clothe with nylon/spandex as feedstock and some polyester/spandex yoga clothes and sportswear sold online. As for low-end warp knitting field, except for super-soft fabric and velvet fabrics with high market share, the content of spandex in some interlocked fabrics could be 10%. Some high-end warp knitting fabric makers also used spandex 30D and nylon 20D to produce nylon/spandex underwear for sports, with content of spandex as high as 45%. Expanding downstream machine and higher content of spandex laid foundation for hot demand for spandex. 

Spandex price continued rising. Trading was intensive in Q2 2021 and suppliers focused on guaranteeing supply to core customers with low stocks at hand. Inventory of spandex has hit historic new low by end-May. Some dealers started hoarding up stocks and became unwilling to sell when spandex price extended higher. In one word, demand for spandex presented hot, while stocks of spandex were limited in manufacturers, dealers and downstream fabric mills. 

3. Spandex cost dipped from high level

Price of major feedstock for spandex including PTMEG and MMDI both dropped in May. Price of MMDI fell obviously since Q2 amid plain demand. Demand for PTMEG was strong from spandex field but suppliers saw slightly rising stocks when buyers only purchased to cover the pressing demand and bargained for lower price. In addition, price of BDO, upstream product of PTMEG, declined substantially. Therefore, price of PTMEG curved a downtrend. The overall feedstock cost of spandex slipped by near 5.2% in May. 

4. How will spandex fare later?

Major feedstock of spandex decreases recently, but current spandex price is decided more by own supply and demand status. Supply crunch continues on conventional spandex market. Sales of spandex are not dull during the traditional off-season, mainly stimulated by high operating rate of some warp knitting and circular knitting plants and popular fabrics containing spandex. Demand for spandex remains hot. Price of conventional spandex (20D-30D-40D) is expected to extend higher in short run and the increment of medium-to-coarse denier spandex may be relatively smaller constrained by demand.