Spandex, used as a raw material for epidemic prevention supplies and masks, has experienced rapid price declines this year after experiencing popularity in the past two years. As of July 27, the ex-factory price of spandex 40D is 36,000 yuan/ton. Compared with the price of 38,000-42,000 yuan/ton in early July, it has dropped by at least 2,000 yuan/ton.
Compared with last year’s peak in July, the numbers are even more shocking! It dropped 44,000, a drop of more than 50%! One Night Dream goes back to October 2020, and the limit is close to the historical low of 28,500.
The sharp fall in spandex prices has affected the performance of manufacturing companies. Recently, Xinxiang Chemical Fiber (000949.SZ) and Huafeng Chemical (002064.SZ) released semi-annual report forecasts, and the performance of listed companies has declined significantly.
Although spandex prices have continued to fall this year, the decline has slowed down recently. The peak demand season for spandex generally begins in mid-to-late August. On the one hand, the cost side is supported, and on the other hand, winter orders are gradually placed. After the price of raw material BDO drops sharply, once demand picks up, spandex prices may stop falling and rebound.
Decline in demand continues to be sluggish
Spandex, also known as polyurethane elastic fiber, is mainly used in the field of textile and clothing to increase the elasticity and comfort of fabrics. After the outbreak of the COVID-19 epidemic, it became an important raw material for the production of anti-epidemic materials and masks. In addition, the downstream demand for the raw material BDO surged and the price rose rapidly after the promulgation of the plastic restriction order. As a result, the price of spandex 40D once exceeded the 80,000 yuan/ton mark in the past two years. .
At the beginning of 2022, the mainstream quotation of spandex 40D was still at 58,000-62,000 yuan/ton, and the price was almost halved in half a year, mainly because the downstream demand for spandex was too sluggish.
my country’s current epidemic control is relatively good, and the demand for anti-epidemic materials and masks has stabilized. Compared with the previous two years, the demand for raw materials for products has dropped sharply. From the perspective of the textile industry, in the post-epidemic period, downstream consumption has not rebounded in a retaliatory manner. Trade demand is not high, and foreign trade orders go to Southeast Asia, which suppresses the textile industry’s demand for upstream raw materials.
As of last week, the operating rate of chemical fiber weaving in Jiangsu and Zhejiang was 45.51%, down 1.40% from last week. The operating rate of most weaving factories is at a low level.
It is difficult to store raw materials such as PTMG and MDI required for spandex production. Generally speaking, spandex production companies usually do not stop operations due to weak downstream demand, so corporate inventories have increased significantly this year. As of last week, the total inventory of domestic spandex companies was 47 days, much higher than the same period last year.
Since the beginning of this year, spandex companies have been lowering prices to sell goods due to greater inventory pressure, and product prices have been falling. After continuous profit sharing, many companies have already suffered losses in the second quarter. Fortunately, the prices of raw materials such as BDO and PTMG have also fallen sharply. Otherwise, many spandex companies would have been unable to survive long ago.
The price of spandex has plummeted, which has a greater impact on the performance of listed companies. Recently, Xinxiang Chemical Fiber announced that its net profit in the first half of this year was 8 million yuan – 10.5 million yuan, a decrease of 98.58% – 98.92% compared with the same period last year; while Huafeng Chemical’s semi-annual report forecast showed that its net profit in the first half of the year was 2.2 billion yuan – 2.4 billion yuan. , a decrease of 42.87% – 37.67% compared with the same period last year.
The industry may undergo an accelerated reshuffle
The price of spandex continues to fall, but large spandex manufacturers are still actively expanding production.
In March this year, Huafeng Chemical raised 2.773 billion yuan through a fixed increase for a differentiated spandex expansion project with an annual output of 300,000 tons; Xinxiang Chemical Fiber plans to raise funds to invest in a high-quality ultra-fine denier spandex fiber project with an annual output of 100,000 tons; Taihe New Materials (002254.SZ) has recently started construction of a 200,000-ton spandex project, and is also constructing a green differentiated spandex project with an annual output of 30,000 tons. According to industry data from Longzhong Information, the current production capacity of spandex is 1.066 million tons, an increase of 8.48% from the end of 2021.
The expansion of spandex production by large enterprises will accelerate the reshuffle of the industry. At present, most small and medium-sized spandex enterprises have backward production capacity and are far below the current industry level in terms of technology, product quality and cost. After the new production capacity of large factories is put into operation, market competition will intensify and is expected to accelerate. Industry consolidation and increased industry concentration.
In order to suppress the decline in spandex prices, the operating rate of spandex production has been significantly reduced recently. The operating rate of large enterprises including Xinxiang Chemical Fiber and Taihe New Materials has dropped to about 70%, and the operating rate of small and medium-sized enterprises has been as low as 50 to 60%. The overall operating rate of spandex has been reduced significantly. It has reached an all-time low. However, the new production capacity of large enterprises has basically not been supplied to the market to prevent further price cuts of spandex. However, we remain optimistic that the price of spandex will stop falling in the near future. The peak demand season for spandex generally begins in mid-to-late August. On the one hand, there is support from the cost side, and on the other hand, winter orders are gradually issued. Demand-side stimulation can boost the price of spandex; at the same time, there will be large-scale expansion in the fourth quarter. The manufacturer has long-term technical renovation and maintenance plans for multiple spandex units. The supply of spandex is expected to fall significantly, which can support the rebound of spandex prices.
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