Spandex price near record low amid long supply

Price of spandex curved an "A"-shape trend since the outbreak of pandemic, which could be divided into three stages: the first was from early-2020 to Aug 2020, touching bottom; the second stage was from Sep 2020 to Aug 2021, with surging price; the third stage was from Sep 2021 till now, in downward correction. After more new spandex plants started production while demand failed to chase up quickly. Supply glut became more prominent. The inner competition of spandex market became fiercer. Current spandex price has been close to historic low. How will spandex go in 2024?

Spandex price declined more than feedstock price

Current spandex price has reduced by 62.0%-67.8% compared with the peak in Aug 2021, bigger than the 60% decrement of major feedstock cost. Price spread of spandex 20D and 40D was squeezed apparently. Price of spandex 20D and 40D has been close to the lowest in 2020, which was closely related with the massive startup of units in Midwest China with high efficiency and low cost. With the application of big polymerization, multi-end spinning and intelligent manufacturing and regional advantage, the production cost of 20D and 30D was lowered. Price of 20D and 30D greatly decreased with great capacity expansion. Apparently supported by cost and under losses, current price of spandex 40D was still around 2000yuan/mt higher than the historic low.

Supply: higher growth rate of spandex

The growth rate of spandex capacity marginally enlarged in Chinese mainland in 2020-2023, with four-year average at 10%. New spandex capacity was at 460kt/year in 2020-2023, 98kt/year of capacity was eliminated and 28kt/year of capacity was revised up. That meant the net increase of spandex capacity was at 390kt/year.

Demand growth rate: medium-to-above

The growth rate of demand for spandex curved a deep "V" trend in Chinese mainland in 2020-2023. The average growth rate of spandex demand was at 8.8% in 2020-2023, belonging to medium-to-above growth but still lower than the growth rate of supply. The spread of pandemic was relatively stable in Chinese mainland. Demand for mask, protective clothing, home dress, thermal apparels and textiles and apparels shifted to China. As a result, the growth rate of demand for spandex was averaged at 11.2% in 2020-2021 in Chinese mainland. In 2022, demand turned muted in Europe and US affected by the Russia-Ukraine conflict and high inflation, and some orders were shifted to emerging markets. The residents' income was under stagflation and players held weak expectation amid the pandemic prevention and control policies in China. Demand for spandex saw negative growth, which was rare, down by 6.9% on the year in 2022. Demand for spandex sees high growth rate again in 2023 with low price, growing downstream machine, wider application and higher content in downstream sector. The growth rate of demand for spandex is estimated to rise by around 20% to 853kt in 2023.

The "sequelae" of the spandex industry chain after the high prosperity cycle still exist. BDO-PTMEG-spandex market is under capacity expansion peak in 2024. Supply of PTMEG is tight in 2023 and it will gradually exceed demand. Capacity in medium-to-large spandex companies will continue increasing substantially. Price of spandex may fluctuate near bottom in 2024 and the price competition will keep austere. The operating rate of spandex plants is estimated to be medium-to-low as the demand is expected to grow limitedly.