Will spandex prices rebound amid soaring BDO

BDO-PTMEG-Spandex prices hit periodical bottom in Sep. Price of BDO soars due to low supply and growing demand, up by near 3,000yuan/mt compared with the year low by Sep 15. PTMEG plants intend to raise price but price still shivers at low level. Sales of spandex accelerate supported by low operating rate and recovering demand. Supply of some spandex varieties becomes tight. Downstream demand for spandex is supported by the traditional peak season expectation. Will prices of spandex rebound?

Firstly, the cash flow of spandex value chain shrinks to low level, and supply obviously contracts. Supply of BDO is low with intensive production curtailment and suspension during the turnaround season in Sep, while demand grows. BDO price is revised up to lower losses. Demand for PTMEG touches bottom and gradually recovers. Sales of PTMEG increase in Sep. Supply of PTMEG rises while is obviously low. Price of PTMEG edges up stably. The cash flow of spandex 40D apparently decreased in Jul and Aug with substantially reducing PTMEG price while the spot profit increases to positive territory when price of spandex declines slower. The operating rate of spandex plants has been ascended to above 60% from 50%, remaining low.

Secondly, demand improves and sales of spandex rise. Sep and Oct are traditional peak season for fabric and textiles market. Downstream buyers turn to purchase normally to cover 7-20 days of production from only buying on a need-to-basis. Some downstream plants have replenished 1-month of spandex. The operating rate of downstream plants is advancing, especially warp knitting super-soft fabrics and circular knitted fabric producers. Spandex producers see apparently increasing sales. Stocks of spandex have fallen to above 36 days, down by near 15 days from high level. The delivery of some warp knitted spandex 40D is tight and needs to queue. Supply of 30D is also tight in some plants while that of 15-20D keeps abundant.

The operating rate of spandex downstream fabric mills has continued rising since late-Aug, with that of circular knitting plants at 30-50% in Zhejiang, Jiangsu, Guangdong and Fujian and that of warp knitting mills up to 50-70%, even above 70% in Haining. The run rate of lace knitting plants also advances. Most downstream plants witness better domestic orders, mainly for the online shopping spree in Nov and Dec, which can mostly guarantee production until end-Sep. Export orders also slightly grow.

Remark: above run rate is the average run rate of conventional covered yarn plants in Zhejiang, circular knitting plants in Guangdong, Zhejiang and Jiangsu, warp knitting plants in Guangdong and lace mills in Fujian.

Supply of feedstock and spandex is both low now. Fabric mills see improving demand and such status may last for a period. Price of spandex has touched periodical bottom recently and that of some varieties is slightly adjusted up. Some plants cancel earlier discounts. Spandex suppliers are estimated to see slightly falling inventory in short run. Whether price of spandex will rebound depending on the price change of PTMEG, the operating rate change of existing spandex units and the startup of new units. In addition, the durability of downstream orders should be noted too. In general, price of spandex is still likely to meet resistance in rising. Suppliers may focus on retaining customers at first.