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Spandex market cools down again

2023-10-27 08:10:39 CCFGroup

Spandex price does not increase in Oct like past years and the performance is apparently in contrast with that in Oct 2022. In Oct 2023, overseas market is in turmoil and supply of spandex value chain rises. Price of PTMEG may touch periodical peak in short run. The operating rate of spandex is medium-to-high. Demand for spandex is estimated to weaken later. As a result, transactions of spandex turn thinner.

 

Major feedstock: supply of PTMEG marginally increases

 

The situation of tight supply and supported price on PTMEG market changes. Many new PTMEG units will start operation in end-Q3 and Q4 of 2023 and in the first half of 2024. PTMEG capacity advanced by 76kt/year in Sep, which is expected to rise by 46kt/year and 46kt/year in Oct and Nov. In early-2024, around 60-120kt/year of new units are scheduled to commission production. Some new plants will be put into production in early-Q2 of 2024 too. Supply of PTMEG will increase while it may sustain tight in short run as the release of products needs time. Affected by the gap between supply and demand, price of PTMEG is estimated to hit periodical peak. MMDI is another major raw material of spandex, and many MDI units will have turnaround later. Supply of MMDI is expected to turn tighter. However, as the unit consumption of MMDI in each ton of spandex only accounts for 18%, it supports spandex price limitedly.

 

Supply: operating rate of spandex plants is medium-to-high

 

Spandex capacity is flat at 1211.5kt/year in Chinese mainland in Oct 2023. Operating rate of spandex plants is stabilized at around 82% now, above 84% in large companies and near 77% in small-and-medium sized enterprises. Some new PTMEG units start operation. Some spandex plants who are bothered by tight feedstock supply may ramp up run rate. Supply of spandex is anticipated to keep growing in short run. 

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Demand: operating rate of fabric mills slightly decreases

 

Operating rate of downstream fabric mills is diversified in Oct, which slightly declines compared with the peak in Sep. The run rate of circular knitting plants is around 40-50% in Zhejiang, Jiangsu and Guangdong. The production of double-faced sweater weakens and the sampling orders of single-faced spandex single jersey chase up. The run rate of covered yarn mills and warp knitting plants is at 60-70% or above. Sales of woven covered yarn are better than those of knitted ones. The run rate of lace knitting mills in Changle, Fujian and braid mills in Guangdong is at 30-50%. The performance in Sep was worse than anticipated and orders fail to grow in Oct. Therefore, many players are not optimistic in market trend.

 

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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, lace mills in Fujian and core-spun yarn plants in Zhangjiagang.

 

In terms of domestic sales, as the balance sheet of domestic residents is still under repair after the epidemic, the recovery of consumption and textiles and clothing is weaker than expected. The inventory of spandex suppliers were apparently transferred to downstream market in Jul-Sep. However, in Oct, supply/demand relationship softens on spandex market. Buyers are cautious in restocking spandex and squeeze spandex invention at hand. Spandex suppliers see slightly mounting inventory in the first half of Oct. As for exports, from Jan to Sep 2023, textile and clothing exports totaled US$223.15 billion, down 9.5%. Of this total, textile exports totaled US$101.92 billion, down 10.3% from the same period of last year, and clothing exports totaled US$121.23 billion, down 8.8% on the year. In 2023, under high inflation and high interest rates overseas, China's textiles and apparels exports to Europe and the United States shrank significantly and the decrement was more than those to emerging markets such as Vietnam. However, exports to Belt and Road Initiative and Russia maintained the momentum of growth. With the destocking of overseas textiles and clothing, the later new orders still need to be closely watched.

 

In summary, spandex market enjoys weaker support from cost and demand sectors now. The inventory of spandex is medium-to-high. Few spandex units suspend or curtail production. Current operating rate of spandex plants is still above 80%. The gap between supply and demand enlarges on spandex market. If large-scaled production suspension and curtailment does not emerge, the price competition may be inevitable later.

 

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