Probe into spandex market trend in March

Spandex value chain witnessed firm raw material market but weak downstream sector in Feb. In Mar, raw materials of spandex is expected to be hard to fall but easy to increase and downstream demand is improving. Will suppliers raise price when the cost pressure of 35D, 40D and medium-to-coarse denier ones is big? Will price of spandex stabilize and even rally?

Price: opens lower

Price of spandex and PFY declined after the Spring Festival holiday dragged down by plain downstream demand although raw material prices climbed up. Price of NFY also rose little. Price of spandex decreased more compared with other PFY and NFY, with decrement of 40D at 5.4% or 3000yuan/mt from Feb 7 to Feb 25.

Supply: expected to rise further

Around 176kt/year of spandex capacity was cut or suspended in early-Feb and the scale reduced to 63kt/year by the end of Feb after the Winter Olympics ended and some plants resumed operation from production curtailment during the Lunar New Year’s holiday. 910kt/year of capacity was running now, around 115kt/year higher than the same period of last year. Ningxia Hyosung’s new unit gradually released production. Supply of spandex rose by near 10,000 tons on the year and the increase may continue expanding in Mar.

Inventory: to reduce in Q1

The highest inventory basically emerged near the Lantern Festival (the 15th day of the first lunar month) comparing the inventory trend in the first quarter of 2018-2022. Inventory of spandex piled up in 2020 after the Spring Festival holiday due to the outbreak of the pandemic. In 2018, 2019 and 2021, stocks of spandex reduced by 10 days, 19 days and 7 days respectively in the Q 1. The inventory of spandex decreased by 1 month in Apr 2020 stimulated by hot demand for ear band of mask.

The inventory after this Spring Festival holiday can be described as low comparing with 2018-2021. Speculative demand is lacked. Buyers are cautious when the global economy encounters bigger downward pressure with intensified regional conflict in 2022. Rigid demand from some circular knitting plants improves and downstream replenishment is growing in Mar, while some circular knitting plants is also slashing the content of spandex amid high spandex price. Spandex suppliers are expected to see shrinking inventory but the reduction is limited.

Current inventory of spandex is still low compared with the same period of previous years. Demand is anticipated to moderate in traditional peak season Mar and Apr. In addition, raw material prices of spandex are hard to drop but easy to increase. Spandex suppliers are likely to adjust up price. However, spandex industry is weakening now. The support of cash flow to 20D, 30D and 40D differs. Leading spandex companies will release around 162kt/year of new capacity in Mar and Q2. The price competition among 20D and 30D may sustain intensified. Price of 40D and medium-to-coarse denier spandex is likely to be easy to advance but difficult to decrease, which is near the break-even line now.