In recent years, the supply and demand side of spandex has maintained steady development. Under the global epidemic economy in 2020, spandex has exceeded expectations in the second half of the year. In 2021, the price of spandex has hit a nearly 10-year high. In the next five years, spandex companies will enter a cycle of capacity expansion. In the future, an industry structure will be formed with leading CR5 companies as the main players. As industry concentration continues to increase, great changes in the industry are already on the way.
Production capacity continues to grow, and industry concentration continues to increase
In 2020, my country’s spandex production capacity will be approximately 920,000 tons, making it the world’s largest spandex production and consumer In recent years, with the increasing demand for spandex, my country’s spandex production capacity has also maintained rapid growth. At present, there are about 20 domestic spandex companies, forming an industry structure led by leading companies such as Huafeng Spandex, Zhejiang Xiaoxing, Bailu Chemical Fiber, Taihe New Materials, and Huahai Spandex. The factories are basically operating stably.
Figure 1 Changes in spandex production capacity and growth rate from 2001 to 2020:
Before 2014, spandex was in its infancy in China. Factory equipment and technology were backward, and production technology was imperfect. The entry of new varieties of chemical fibers into the market attracted funds from both inside and outside the market. At the beginning of the 21st century, domestic spandex production capacity was small and there was great development. Space, and then with the continuous improvement of quality, China’s spandex production capacity increased year by year and gradually entered a stage of rapid development.
After 2014, the production capacity of spandex factories continued to expand. After five years of rapid development, capacity expansion was mostly concentrated in leading companies with large scale and strong financial strength. The concentration of the spandex industry continued to increase. In 2016 Since the beginning of 2018, due to oversupply, the profitability of the spandex industry has deteriorated, and small and medium-sized spandex companies have been under heavy production pressure. The industry has further accelerated the elimination of backward production capacity. The number of spandex companies above designated size has dropped from 57 to 24 in 2020, and the industry CR5 will be by mid-2020. Reaching 67%, the industry competition landscape has improved.
Figure 2 Domestic spandex CR5 proportion:
Table 1 Domestic Spandex future production schedule:
New spandex production capacity will be limited in 2021. Under the influence of multiple factors, small and medium-sized enterprises in the industry will Enterprises are no longer able to carry out large-scale production capacity expansion. The new production capacity in 2021 is mainly Huafeng Chongqing’s 40,000 tons of differentiated spandex, which will be put into production in the second half of the year. Among them, Bailu Chemical Fiber’s 30,000 tons and Taihe New Material’s 45,000 tons of new investment are expected to be completed and put into production by the end of 2021.
However, from the next five years, spandex is still in a new cycle of accelerating capacity expansion. Industry development is still concentrated on leading enterprises and listed companies, and industry concentration will rise to a new level again. high.
The supporting factors affecting the sharp rise in the spandex market are strong cost-side support
Figure 3 Domestic BDO market trend chart in 2020:
The domestic BDO market rebounded strongly after hitting bottom in the second half of 2020, reaching a high in the past twelve years, with an increase of nearly 300%, there are three main reasons for such a rapid increase:
1. Supply shortage: Due to the impact of the epidemic, many foreign BDO factories have stopped working, and subsequently purchased raw materials from China and purchased PTMEG and other products. Foreign orders are increasing, while domestic BDO factories have been shut down for maintenance and repairs one after another. In early 2021, many units were shut down for maintenance or catalyst replacement, and production was unable to continue. In addition, since January, due to the impact of the COVID-19 epidemic in some areas, logistics and transportation have been restricted and freight rates have increased, resulting in delayed order delivery. As a result, my country’s BDO supply is in short supply, supporting price increases.
2. Good demand: After October 2020, textile demand has picked up, and the production and sales of the PTMEG-spandex industry chain have increased steadily. As the largest downstream industry of BDO, PTMEG’s high production has also increased the consumption of raw materials. Other downstream industries are also developing well and demand is increasing. At the same time, the PBAT industry, a dark horse industry in the downstream industry, is driven by the national plastic restriction policy and has seen a surge in demand, thereby increasing its ability to digest raw materials.
3. Bidding prices push up: In September 2020, the domestic BDO industry began to implement the online bidding model, and the prices after each auction were relatively high, boosting the trading confidence of the industry. In a market that is already in short supply, industry auction prices have been booming to push up the market, and at the same time, it has also stimulated downstream buyers to enter the market to cover their positions.
Figure 4 Trend chart of spandex raw materials and price difference changes:
The upstream raw materials of spandex are mainly PTMEG and pure MDI. The ratio between the two is nearly 8:2. The upstream cost has increased significantly in 2020. Driven by BDO, the main raw material PTMEG has an overall trend that is stable and upward. The growth rate of the entire industry chain of BDO and PTMEG is too fast and too large, exceeding the terminal level to a certain extent. The market still needs to return to the normal acceptance range of downstream products. After the price of pure MDI rose strongly to a high point, it gradually returned to rationality.After the Spring Festival, as small and medium-sized enterprises have not yet resumed work, the participation in on-site quotations is weak. The opening after the holiday is mainly stable with little change. However, the overall demand side is still following suit. As terminal demand gradually enters the market, the supply side gap is still obvious. Pure MDI also experienced a sharp increase after the Spring Festival. As of March 3, 2021, PTMEG has increased by 20,200 yuan/ton during the year, an increase of 102%, and pure MDI has increased by 7,000 yuan/ton during the year, an increase of 32.56%. With strong cost support, spandex prices have gradually climbed to high levels.
Spandex is hard to find and supply is in short supply
Figure 5 Domestic spandex production trend chart:
Despite the impact of the epidemic in 2020, domestic spandex production still reached approximately 720,000 tons, a year-on-year increase of 5.41%. The annual capacity utilization rate in 2020 remained high, and the average annual operating rate reached 82%, which was the same as in 2019. The spandex industry has developed beyond expectations. In addition to the previous demand for traditional textiles and clothing, the global epidemic has fermented and the demand for medical protective equipment has surged, which has also brought certain demand support to the spandex market. Since October 2020, domestic and foreign textile demand has picked up. The average load of domestic spandex companies has increased to around 88%, and productivity has been stable.
Figure 6 Comparison of domestic spandex inventory changes from 2017 to 2021:
Inventory levels have also increased from those in the first half of the year The 40-50 days has dropped to about 12 days currently, which is far lower than the three-year average of 30-40 days. Currently, manufacturers are closed and are not accepting orders for the time being. The shortage of supply has continued to this day, which has pushed the spandex factory’s bids to continue to rise. .
Spandex downstream demand support
Figure 7 Changes in downstream weaving terminal textile and apparel data:
Current global Chemical fiber terminal consumption is steadily recovering from the bottom of the epidemic. Domestic retail sales of chemical fiber terminal clothing, shoes, hats, needles, and textiles have maintained positive year-on-year growth since August 2020; in terms of foreign trade, although the year-on-year growth rate of European and American clothing, footwear and hats retail sales is still in a negative growth stage, the decline has gradually narrowed. Domestic per capita consumption has shrunk due to the impact of the epidemic. However, with the progress in subsequent vaccine research and development and the epidemic being better controlled, a recovery in domestic and even global consumer demand is expected. At the same time, with the continuous improvement of living consumption levels, the pursuit of quality of textile clothing is also increasing, and the amount of spandex used in various types of textile clothing is also gradually increasing. Secondly, the current global epidemic has not yet been fully controlled, and the demand for spandex for epidemic prevention materials such as masks, protective clothing, medical bandages, etc. will also increase in the future.
The current inventory of the domestic and foreign chemical fiber industry chains is at a low level. As of December 2020, the domestic terminal gray fabric inventory is at a low level in recent years. According to data from the National Bureau of Statistics, the inventory of finished products in the textile and apparel and apparel industries has also been relatively low in recent years. Low level; against the background of low inventories in the domestic and overseas chemical fiber industry chains, the impact of the epidemic will gradually weaken, and terminal demand is expected to improve significantly, which will also bring about replenishment demand for the entire chemical fiber industry chain at home and abroad. According to statistics from Longzhong Information, downstream spandex consumption in 2020 is around 720,000 tons, an increase of nearly 10% compared with 2019. Under the epidemic economy, spandex has developed beyond expectations.
To sum up, the spandex market is mainly driven by the cost-end market and the supply exceeds demand. The short-term correction space is limited, and factory quotations still remain at a relatively high level. After the downstream weaving resumed work after the holiday, faced with high-priced raw materials, the intention to chase prices and purchase was weak. At present, the fine-denier and high-priced spandex has exceeded the acceptable level on the demand side. Low-end products cannot afford it, and high-end products use less. Downstream weaving companies either Accept high-priced raw materials, or wait and see before being forced to reduce production or stop production. The overall load operation of the spandex market has reached a high level. In the future, we need to pay attention to whether the upstream BDO can increase the operation, increase supply, and strengthen reasonable control over the bidding model. The cost side has not been lowered in the short term. The spandex market can still maintain a strong pattern, and the bargaining power of the chemical fiber market is still controlled by upstream manufacturers.
At present, the increase in spandex supply in 2021 is limited. The terminal demand in the post-epidemic era must continue to improve, which will continue to drive the replenishment of the entire spandex industry chain. There is limited space to increase the operating rate of spandex factories and there is little new production capacity. Next, the tight supply of spandex may continue and the short-term market price will increase. Follow-up attention will be paid to the start of upstream raw materials, price changes and the replenishment acceptance of downstream customers. </p
