“Supply exceeds demand”, what is the market outlook for spandex?

After experiencing the “high temperature” market in the past two years, spandex prices have been in a downward range from around November last year to August this year.…

After experiencing the “high temperature” market in the past two years, spandex prices have been in a downward range from around November last year to August this year. Is the current market situation of spandex market normal? What are the influencing factors behind the continuous price decline? Under the same market conditions and products of the same specification, some companies are making profits while others are losing money. What is the key point of differentiation? With the “Golden Nine and Silver Ten” coming soon, will the spandex market improve?

“Enthusiasm” recedes and profits decline

After the hot market lasted for about two years, the price of spandex in the domestic market began to fall around November 2021 and continues to this day.

Statistics from China Fiber Network show that throughout 2021, the average annual price of 40D spandex is 67,000 yuan/ton, a year-on-year increase of 117%. In 2021, the highest monthly average price of spandex occurred in August. The average monthly price of 40D spandex in that month was as high as 79,700 yuan/ton, and once reached 80,000 yuan/ton during the period.

However, in January this year, the average monthly price of 40D spandex dropped to 57,300 yuan/ton, which was a drop of 22,400 yuan/ton from the high monthly average price of 79,700 yuan/ton in August last year. On August 22 this year, the mainstream transaction price of 40D spandex has dropped to 29,000 yuan/ton to 35,000 yuan/ton, with a price index of 31,500 yuan/ton.

“For the whole of last year, especially in the second and third quarters, the spandex market was in a state of shortage as a whole, and prices continued to rise. It was really ‘one price a day’. Even so, downstream customers often couldn’t get the goods. The output of each company is Of course, as soon as the factory produced the product, it had to be shipped out, and all manufacturers were basically out of stock. Under normal circumstances, the industry’s inventory level is generally 20 days to 30 days, but in the second and third quarters of last year, the industry’s inventory level was The inventory is only 6-7 days. By mid-August this year, the overall inventory level of the spandex industry was relatively high, reaching 40 days to 50 days.” A member of the Marketing Department of Huafeng Chemical Co., Ltd. (hereinafter referred to as “Huafeng Chemical”) The person in charge introduced this to reporters.

It is understood that, taking into account the actual market conditions, some spandex companies began to reduce and suspend production starting in June this year, which lasted until the end of July. In August, some manufacturers gradually began to dynamically resume production.

“Since August, the domestic spandex market has remained flat, the raw material market has been weak, the spandex industry has a backlog of inventory, and the operating load rate is less than 60%, which is relatively low.” said Jiang Zhenhua, a spandex category analyst at China Fiber Network.

Li Zengjun, chief economist of the China Chemical Fiber Industry Association and executive vice president of the Spandex Branch, said: “The price of 40D spandex has dropped to 35,000 yuan/ton to 36,000 yuan/ton, which is a relatively reasonable price. In the past two years, affected by the In the hot market caused by the epidemic, the price of one ton of spandex reaches 80,000 to 90,000 yuan, or even exceeds 100,000 yuan, which is abnormal.”

“The current market situation is normal.” Xiang Xingfu, chairman of Hangzhou Banglian Spandex Co., Ltd., also said the same.

Prices continued to fall, affecting industry and corporate profits. Statistics from the China Chemical Fiber Industry Association show that in 2021, the spandex industry contributed 23% of the total profits of the chemical fiber industry. But this year, the profits of spandex companies have generally declined.

Huafeng Chemical’s semi-annual report shows that in the first half of this year, its net profit attributable to shareholders of listed companies was 2.395 billion yuan, a year-on-year decrease of 37.81%. Among them, the operating income of the fiber segment was 5.603 billion yuan, a year-on-year decrease of 8.79%; the gross profit margin was 19.08%, a decrease of 29.29 percentage points from the same period last year.

The semi-annual report of Xinxiang Chemical Fiber Co., Ltd. (hereinafter referred to as “Xinxiang Chemical Fiber”) shows that in the first half of this year, its operating income was 3.964 billion yuan, a year-on-year decrease of 3.84%; the net profit attributable to shareholders of the listed company was 9.4224 million yuan, a year-on-year decrease of 98.72% %. Among them, the revenue of the spandex segment in the first half of the year was 2.448 billion yuan (accounting for 61.75% of the total revenue), a year-on-year decrease of 20.12%; the gross profit margin was 10.06%, a decrease of 30.91 percentage points from the previous year.

Falling prices of raw materials are transmitted downwards

The “high temperature” market fell back to “expected”. The factors leading to the continued decline in spandex prices are complex.

From the perspective of raw materials, since this year, the prices of upstream raw materials BDO (1,4-butanediol) and PTMEG (polytetrahydrofuran) have dropped significantly, which has limited support for spandex production costs. Traditionally, the most important downstream application field of BDO is PTMEG. In 2020, BDO’s application in the PTMEG field accounted for more than 50%, and PTMEG is the main raw material for the production of spandex. Other downstream application areas of BDO include PBT (a type of thermoplastic polyester), PU slurry, PBAT (biodegradable plastic), etc.

In 2020, affected by the “plastic restriction order”, the demand for PBAT in the domestic market increased significantly, resulting in a tight supply of BDO and rising prices, which to a certain extent supported the “rising tide” of spandex prices.

Statistics from Baichuan Fuying show that as of the end of 2021, the market price of BDO was 31,000 yuan/ton, an increase of 147% from the beginning of that year. However, since this year, the price of BDO has continued to drop. In mid-July, its price was about 18,000 yuan/ton; in late August, its price had fallen below 10,000 yuan/ton.

“The cost price of BDO is about 10,000 yuan/ton. The current price has fallen below the cost price, the market is sluggish, and some companies have begun to lose money.” A chemical raw material analyst from a Shanghai securities firm told reporters that chemical raw materials and chemical fiber products are industry Upstream and downstream of the chain, market conditions often show a “linkage effect.” The price of BDO in 2021 will be about more than 20,000 yuan/ton at the low point and one degree at the high point.�For spandex yarn equipment, the number of ends cannot be too many. ”

After the number of spandex spinning equipment is increased, how will the efficiency be improved? Sun Xiangdong explained: “For example, looking at the efficiency of the unit spinning position, compared with the efficiency of the 64-head equipment, the spinning efficiency of the 120-head equipment has increased by almost 100%. Why? In the same spinning position and within the same length of time, The spinning speed has not changed, and has even improved. If a company uses 120-head technology, it can spin out 120 silk cakes, but if it uses 64-head technology, it can only spin out 64 silk cakes. This gap is obvious. .”

On the basis of the continuous improvement of spinning technology, it is also important to start from upstream chemical raw materials and innovate and develop products with better performance and higher added value.

Xiang Xingfu told reporters: “The price of ordinary spandex has dropped much this year, but the price of the company’s newly developed soft spandex is much higher, and the price has not dropped. Moreover, the sales volume from January to August this year has increased by 100% year-on-year. Soft spandex The downstream customers of spandex are knitting companies, which are used to produce sock threads, etc. Customer feedback shows that the use effect of our soft spandex is very good.”

Confederation spandex’s products include ordinary spandex, soft spandex and PT denim customized spandex. The elongation rate of ordinary spandex is about 4-5 times, but the elongation rate of soft spandex can reach 10 times, and has high strength, high recovery and other properties.

Xiang Xingfu said that the development of PT spandex and soft spandex was due to the company’s cooperation with BASF, the world’s leading polytetrahydrofuran (PolyTHF) manufacturer, in the past two years. For example, PT spandex is made of Poly THF Inside developed by BASF.

“One idea for differentiated innovation in spandex products is to find breakthroughs in upstream chemical raw material technology. We cooperate with BASF, and on this basis, we have also made some improvements in spinning technology.” Xiang Xingfu emphasized.

“No matter what the market situation is, everyone must always adjust their mentality, continuously improve quality and management, improve technical equipment levels, and further reduce costs. If two companies have the same product quality and production scale, but one company’s If technology is not improved and production costs are high, then its competitive advantage will definitely be weakened.” Li Zengjun emphasized, “The development of the spandex industry, in the final analysis, depends on the innovation of raw materials and production technology. In short, everyone must practice their internal skills. This is the key to maintaining long-term competitiveness.”

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