Spandex prices to extend higher before H2 March

Spandex market welcomes a good start after the Lunar New Year's holiday with the bullish support from the eased pandemic prevention and control policy, recovering consumption and moderate demand. Supply of spandex can be described as tightly balanced. Some spandex suppliers cancel earlier discounts and price of spandex has increased by 2,000-3,000yuan/mt.

Price of spandex increased the most after the Spring Festival holiday among major textile and apparel raw materials. Taking 40D as an example, it advanced by 2,000-3,000yuan/mt, with increment at around 7.8%. Price of PFY and NFY was weak in early-Feb when downstream fabric mills were slow in resuming operation and saw modest orders. Trading of PFY and NFY reduced as buyers focused on digesting raw materials purchased before. Price of NFY and PFY inched down. Price of spandex and cotton was firm in early-Feb.

Operating rate of spandex plants was slow in rising. The run rate of upstream feedstock plants rose limitedly due to insufficient natural gas. Tight supply of PTMEG constrained the increase of operating rate in big spandex plants. The operating rate of spandex plants increased to 83% by Feb 14 from 57% when the spread of pandemic peaked in Zhejiang and Jiangsu. Price of BDO soared to above the break-even line, which hiked by 4,400yuan/m or 47.8% from 9,200yuan/mt in early-Feb to 13,600yuan/mt now. Offers of PTMEG are at 22,000yuan/mt now, with large increment. There are many new BDO units to be launched but the startup is delayed when the biodegradable plastics face the pressure from macro policies. Supply glut on the BDO industrial chain is expected to be escalated, not ruling out price of BDO to fall later. The inventory of spandex was seriously devaluated last year due to collapsing feedstock price. Downstream plants' spandex inventory can guarantee production for near one month or longer, but fabric mills are slow in restarting. Some spandex plants are cautious in hoarding up stocks amid high PTMEG price, which prevent the raise of operating rate in spandex plants to a certain extent. As a result, supply of spandex is still tight.

Demand fails to turn better as fast as anticipated. Retail sales of apparels, shoes, hats and knitwear were very bad among social consumer goods in 2022 while demand for textiles and apparels is expected to recover in 2023 boosted by bullish macro environment. The new foreign orders should be noted later. The sampling orders for export were scant in Q4 2022. That means the improvement of export orders may take time.

Operating rate of fabric mills apparently ascends this week, with that of circular knitting plants, warp knitting mills, covered yarn plants up to 30-50% or above, which may rise further.  The consumption of spandex may accelerate later if downstream orders chase up smoothly. In addition, the inventory of spandex has been low now. After the stocks of downstream plants reduced and the replenishment for spandex grew, price of spandex may be pushed up.

In summary, spandex market faces positive performance supported by moderate demand, strong cost and recovering market confidence after the pandemic prevention and control policy turned optimized. Price of spandex is anticipated to keep increasing before the second half of Mar, hard to dip but easy to advance. However, transactions of spandex may shrink after price moved up. If downstream plants see inadequate new orders later and demand is weak, coupled with many new spandex units to be launched, the divergence between supply and demand is estimated to be intensified again on spandex market. Price of spandex is likely to under downtrend by that time.