Spandex industrial integration undergoing

Among the integration development of chemical fiber industry, the development of polyester industry is the earliest and fastest. Spandex industry also deepens integration development and extends to upstream market in recent years. Increasing spandex companies are integrated with PTMEG and BDO production. After Hyosung and Qingyun integrated with PTMEG, Huahai's upstream PTMEG and BDO units also started operation. Tayho's integrated PTMEG unit is also under construction and is scheduled to start production in 2024. Huafon Chongqing also announced to develop PTMEG project recently. The upstream integration of spandex industry is accelerating and popularizes to enhance own competitiveness.

Above statistics are based on spandex companies who integrate with PTMEG or PTMEG&BDO. Currently, these spandex companies who are integrated with upstream capacity have accounted for 70% of total spandex capacity. After more plants' integration, the proportion is estimated to be above 75% in the next 2-3 years. Some spandex companies are integrated with PTMEG capacity, and this portion of PTMEG capacity accounts for increasing proportion in total PTMEG capacity, which may exceed 50%.

In terms of the upstream integration of spandex companies, they are mainly integrated with PTMEG, with scarce integration of BDO. Among spandex-PTMEG-BDO industrial chain, the capacity of spandex companies who are integrated with BDO takes up around 20% of total BDO capacity. The application of BDO is wide. PBT, PBAT and GBL industries are mainly integrated with BDO.

The fundamentals of different links differed in 2020 and before and the profitability was also various. Industrial deepening investment increases, but the return on investment is actually different.

In the past three years, the profitability direction of all links of the industry has been consistent. The deepening of the industry can not only improve the industry's supporting capabilities and enhance competitiveness but also clearly maximize industry profits. Since 2021, the domestic industry chain has reached its historical peak of profitability driven by policy advantages, industry trends, and popular demand. Additionally, with the development vision of degradable materials, the industry chain has become a popular investment product.

As for the industrial investment, 2023 witnesses a new round of capacity expansion peak. BDO and spandex plants have struggling near the break-even line after the fourth quarter. Most new PTMEG plants are put into production in the fourth quarter, later than BDO and spandex sectors. After new units start production and prices of BDO and spandex decline to be low, price of PTMEG also started plunging in Q4 and the profit also greatly shrank.

The trend of deepening industrial integration will continue, but from the perspective of industry development and planning, the industrial chain has already embarked on a new round of capacity expansion. However, considering the fierce competition, caution is needed in the pace of industrial integration.