Market review on spandex market in H1 2021 and H2 outlook

Spandex market performed well in the first half of 2021 benefitted from hot demand from elastic fabrics for sportswear, casual wear and yoga clothes and pandemic prevention field. Price of spandex continued rising rapidly and the increment was the highest among major raw materials of textiles and apparels. Attracted by apparently improving profit, the launch of some new units has accelerated since the second half of last year. How will spandex fare in the second half of year? 

Price: extends higher

Prices of spandex rose substantially in the first half of 2021 and the increment of spandex 20D-40D was at 80.2%-97.8%. Supply was short amid hot demand. 

The growth rate of new spandex capacity was only at 6.5% in 2020-2021 while that of demand was above 10% when the application of spandex has become wider. In the first quarter of 2021, price of spandex hiked by around 40-50% compared with the last quarter of 2020 and doubled on annual basis with support from macro market and improving downstream demand. In the second quarter, price of conventional spandex rose by around 30% compared with Q1 and surged by 132%-148% year on year. Supply of spandex remained tight, including 10D-30D and 40D, which was mainly bolstered by demand from dralon fabrics, thermal fabrics, fabrics for underwear and sportswear and warp knitted velvet fabrics. The delivery of spandex needed to queue. Some downstream buyers were even willing to pay with premium when the profit was high.

Operation status: high run rate and low inventory

There was no new spandex capacity in the first half of year. Some old unit was eliminated. Spandex capacity declined by 2.4% to 851.5kt/year in Chinese mainland compared with the end of 2020.

Operating rate: average operating rate of spandex plants was at 95.5% in the first half of 2021, up by 16.9% from last year. Spandex market remained sellers’ market with good domestic sales, surging export and tight supply. Cash flow of spandex producers apparently improved and some old units also ramped up run rate obviously. 

Inventory: inventory of spandex was low in the first half of 2021, moving down by 40.4 days on the year to be averaged at 10.6 days. 

Cash flow: apparently increase

According to the performance projection of 3 listed spandex enterprises, the net profit attributable to the listed company hiked by 441%-486%, 2394%-2570% and 222%-263% respectively in Huafon Chemical, Xinxiang Chemical Fiber and Tayho New Material. Based on the statistics from CCFGroup, the average cash flow of conventional spandex spiked by above 600% on the year in the first half of 2021. Spandex producers suffered losses in 2018-2020 while witnessed apparently higher profit from last year.

Downstream market: Most downstream fabric mills run at high capacity

Operating rate of downstream fabric mills has hit the highest level in recent years. Sales of fabrics for sportswear, elastic fabrics and fabrics for home dressing remained hot. Stocks of covered yarn kept low with smooth sales. Circular knitting, warp knitting and covered yarn machine increased this year, with bigger rigid demand for spandex. The content of spandex in elastic fabrics has apparently climbed up. The content of spandex in fabrics for sportswear and yoga clothes has advanced to 15-25% from 10-20% and that in some sports underwear has been above 50%, replacing nylon to be the biggest raw material. 

The average operating rate of downstream plants was near 49.9% in the first half of 2021, up by around 20% percentage points on the year and increasing by 9.7 percentage points compared with the first half of 2019.

Import and export

According to the data from Chinese customs under Hs code 54024410, spandex imports increased by 29.1% or 2,588 tons to 11.5kt in Jan-May, 2021, and the average import unit price was at $8.560/kg, apparently up by $1.961/kg on the year. Vietnam, Singapore and South Korea were major import origins for spandex, accounting for 75% totally. Imports of spandex from Vietnam, Singapore, South Korea, Japan and Thailand all increased this year. 

Exports of spandex amounted to 40.5kt in Jan-May, 2021, up by 58.3% or 14.9kt on the year, and average export unit price was at $7.672/kg, up by $2.761/kg year on year. Exports of spandex hit historic high in January 2021, apparently rose to 6,507 tons in February, stayed at 8,100 tons in March, refreshed new high of 9,427 tons in April but declined to 7,756 tons in May with tight containers, high sea freight and tight supply.

New spandex capacity

New spandex capacity is expected to be 110-150kt/year in the second half of 2021. Most units are scheduled to start operation in the fourth quarter, so it may affect the actual production limitedly. These new units may contributed to near 28kt of production. Supply tightness on spandex market is expected to be hard to change in short run despite of many new units in 2021. Among these new units, Zhuji Huahai’s 30kt/year unit will start operation the earliest in Q3. Chongqing Huafon’s 50kt/year unit is expected to commission production in end-Aug and Xinxiang Chemical Fiber and Ningxia Tayho’s units each with 15kt/year of capacity plan to start production at the beginning of Q4. Ningxia Hyosung’s Phase I project with 40kt/year of capacity is anticipated to start production at the end of 2021 or at the beginning of 2022, which should be noted.

Market outlook 

The contradiction between supply and demand on spandex market may gradually mitigate after new spandex units started operation in the second half of 2021 and the first half of 2022. The effective output of spandex from new units may be very limited in 2021 as the new units need trial production and it needs time to see stable quality. Around 60% of spandex will be digested in the second half of 2021. The content of spandex in some autumn and winter apparels is high and stocks of spandex remain historic low, far lower than the normal level. In expectation of hot demand and low inventory, prices of spandex are expected to keep rising in the most time of H2 2021. Tight supply may be eased at the end of 2021 after the delivery of domestic orders for the online shopping spree in Nov and Dec and some export orders ended.