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Insight | Time: Aug 23 2021 4:26PM
Spandex prices stop rising due to weaker downstream market
 
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The operating rate of spandex downstream plants started falling from mid-Aug, resulting into slower sales of spandex. Some spandex companies saw slightly mounting inventory. Price of spandex turned to shiver at high level after continued surging in Jan-Jul. Some market players began to doubt whether price of spandex will start falling? How will supply and demand change on spandex market?

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Supply: production stably increased

After some units in Zhuji Huahai started operation, the spandex capacity rose by 20kt/year to 871.5kt. Huafong Chongqing’s 50kt/year unit is expected to gradually commission operation from late-Aug. New spandex units are expected to start production intensively. The existing units may continue running at high capacity. Spandex production is expected to have upward space in end-Q3 and Q4.

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Inventory: remained low

Inventory of spandex slightly accumulated from mid-Aug but still hit historic low. Supply tightness of conventional varieties slightly mitigated. Stocks of medium-to-coarse spandex and black spandex rose faster due to slower sales. Many downstream buyers turned to purchase spandex on a need-to-basis with high spandex price, inadequate new orders and in expectation of the launch of new spandex plants. Buying interest among buyers apparently diminished.


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Fabric mills: rigid demand for spandex slowed down

Export orders failed to chase up smoothly. Some downstream plants started doubting the performance of peak season in Sep and Oct. Price of crude oil and PFY also started decreasing from mid-Aug. Some downstream plants showed lower intention to hoard up stocks due to higher inventory and some have started slashing production, especially circular knitting mills. The operating rate of circular knitting plants in Zhejiang and Guangdong dropped by 10-30% to above 30-50%, that of lace knitting plants slipped to near 30% and that of covered yarn and warp knitting plants was mostly at 60-70%. Falling run rate of fabric mills resulted into apparently slower rigid demand for spandex.

Operating rate of downstream plants 
Downstream plants Region 30-Jul 20-Aug Change on mid-Aug
Covered yarn plants Zhuji and Yiwu 73% 67% -6%
Zhangjiagang Port 72% 72% 0%
Xiaoshan and Shaoxing 74% 73% -1%
Circular knitting plants Foshan 34% 30% -4%
Xiaoshan and Shaoxing 64% 55% -9%
Changshu 62% 54% -8%
Warp knitting plants Guangdong 72% 70% -2%
Haining 87% 73% -14%
Lace knitting mills  Fujian 32% 28% -4%
Average 63% 58% -5%

Market outlook

Price of spandex is expected to continue shivering at high level in short run and meet resistance in climbing up with weaker downstream market. Some plants that quoted high earlier may revise down price to near the mainstream level based on sales ratio. Overall inventory of spandex remains low. The order placement during the coming traditional peak season, Sep-Oct, should be noted later. If orders improve dramatically, price reduction of spandex may be delayed and prices are likely to be adjusted down until the end of Q4.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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