Spandex: will buyers replenish before Spring Festival holiday?

Recently, downstream buyers inquired more and paid increasing attention to spandex market. Price of spandex has been near the historic bottom. There is around one month before the Spring Festival (Feb 10). Apparently more spandex plants curtailed or suspend production. The run rate of spandex plants declined by 10 percentage points to above 70% now. How about the feedstock market trend? Will downstream buyers replenish spandex before the Spring Festival holiday?

Price: spandex price has reduced to near the record bottom

Price of spandex kicked high level in Aug 2021 and was in downward correction for two years, which has been near the historic low now. Currently, price of spandex 20D was mainly at 32000-33500yuan/mt, and some 15D from new unit was pegged at 31000yuan/mt. 40D was stayed at 28000-29500yuan/mt, with some at 26000-27000yuan/mt in new factories. Spandex suppliers will concentrate on selling and collecting payment before the Spring Festival holiday. Price of spandex is estimated to decline for large orders.

Operating rate: run rate of spandex plants dived by 10 percentage points to above 70%

Most spandex plants suffered obvious losses in 2023 with weak prices. Few leading companies saw minor profit. Apparently more spandex plants suspended production near Jan 2024. The number of spandex companies who will halt production is estimated to account for 44% of total spandex enterprises in Chinese mainland, which will increase by 2 to 7 enterprises, while their capacity did not take much proportion of the total. By now, spandex capacity was at 1239.5kt/year in Chinese mainland. Current operating rate of spandex plants decreased by around 10 percentage points over mid-Nov. The capacity of units under operation was more than 910kt/year. The operating rate of leading spandex companies with capacity above 80kt/year was around 83% and that of small-and-medium sized companies was at 41%. Increasing spandex enterprises will cut or suspend production in the second half of Jan.

Industrial chain performance: meager profit

Obviously more small-and-medium sized spandex companies cut or suspended production due to long-term losses. BDO and PTMEG market will see capacity expansion peak in end-2023 and 2024. Supply of spandex feedstock gradually turns to be long from being tight. The inner competition of BDO and PTMEG market intensifies. Most BDO plants suffer losses and the profit of PTMEG also dramatically falls. Spandex producers saw heavy losses.

Medium to downstream players: some showed higher buying interest

In early-2024, price of PFY was in range bound while that of NFY and cotton yarn slightly rallied. Warp knitting and circular knitting mills in Guangdong were eager to take orders and hoard up stocks and some were busy in finishing domestic and export orders. Some fabric mills produced fabrics for spring and summer. Circular knitting mills and covered yarn plants in Zhejiang and Jiangsu showed weaker buying interest than those in Guangdong when export was limited, orders were scarce and capital was tight. Some downstream buyers purchased spandex to cover 15-30 days of production, longer for around 45 days. Spandex suppliers saw slightly falling inventory near the New Year's Day holiday, with inventory down to above 40 days. Leading spandex companies slightly cut price for promotion with cost advantage and their inventory inched down. Small-and-medium sized spandex companies witnessed slowly falling inventory amid low run rate. Some fabric mills saw tight capital and may replenish in late-Jan/early-Feb, and some may even restock to cover the pressing demand after the Spring Festival holiday.

In general, after spandex price kept falling and near the record bottom, the cash flow of BDO-PTMEG-spandex industrial chain has been meager with diversified supply and demand. Spandex suppliers witness unprecedented losses. The operating rate of spandex plants has declined to be medium-to-high and may keep reducing. Demand for spandex is likely to recover after the Spring Festival holiday. Sales of spring and summer fabrics for yoga clothes and sunscreen apparels may be smooth and the appending proportion of spandex remains high. When many spandex plants slash production in a large scale, it may be feasible to purchase spandex under low price before the Spring Festival according to own orders.