Spandex: lackluster demand VS increasing supply

Reviewing the development path of the spandex market after the Spring Festival last year and this year, it is evident that there are significant commonalities on the supply side. After the Spring Festival, the supply is similar to last year, with expectations of a more than 10% increase in operating rate from post-holiday until March. Additionally, both last year and this year saw a certain scale of new capacity entering the market in the first half of the year, further boosting spandex production in Chinese mainland.

However, the challenges on the demand side of the spandex market are more pronounced. From the perspective of downstream fabric manufacturing and apparel enterprises, high inventory and insufficient new orders have become two major constraints on their development. After this year's Spring Festival, fabric manufacturing enterprises and apparel companies are facing issues with excessive finished product inventory. Most fabric manufacturing factories are currently working on orders from earlier production periods; although there are some follow-up orders in both domestic and foreign trade, large orders are scarce, and the overall situation for new order follow-ups is relatively mediocre. This directly leads to a slowdown in operating rate increases in certain downstream sectors.

The operating rate of circular knitting mills in Zhejiang, Jiangsu and Chaozhou and Shantou from Guangdong was at 40-50% or above, and the recovery of double-faced machine was especially slow, mainly at 30-40%. Single-faced machine mainly produced light fabrics for spring and summer and the replenishment, with run rate apparently higher than that of double-faced machine. The run rate of air coverd yarn mills in Zhejiang and Jiangsu, cotton core-spun yarn mills in Zhangjiagang, warp knitting mills in Guangdong and diaper plants in Guangdong increased apparently, mainly around 60-70%. Some large air covered yarn plants even ran at full capacity. Sales of woven air covered yarn were moderate but those of knitted ones were slack. The operating rate of warp knitting plants and core-spun yarn mills was high on the whole. The new orders for fabrics are critical later. If it remains unsmooth, some fabric mills may be forced to cut run rate burdened by inventory. However, since this year is the Year of the Snake in the lunar calendar, with an extra June, the colder weather may cause seasonal delays, and a warming trend could boost orders for spring and summer fabrics. Additionally, last year's challenges with fabric factories collecting payments, combined with the current high inventory, have also created financial pressure.

Remark: above data is the average run rate of covered yarn plants in Zhejiang, circular knitting mills in Zhejiang and Jiangsu, circular knitting mills in Guangdong, lace knitting plants in Fujian, warp knitting plants in Guangdong and core-spun yarn plants in Zhangjiagang

In terms of sales of spandex factories in January and February 2025, under the weak support from upstream and downstream, spandex manufacturers have pushed for price increases, which has significantly stimulated suppliers' cash flow and inventory transfer to downstream sector before the Spring Festival, although this has somewhat overdrawn the pre-holiday market. The earlier presale of spandex suppliers have mostly been completed, while a few remain undelivered due to high finished product and raw material inventories with no place to store them. The issues with new orders at fabric mills have resulted in slow increase of operating rate, extending the cycle for buyers to digest spandex and other raw material inventories, and leading buyers to follow up on new order purchases on a per-order basis. Overall, sales of spandex industry performed well in the first two months of the year, but the pressure for sales in March is evident, with some downstream buyers able to use their orders until the end of March or early April, while most buyers may only digest their inventories around mid-March.

After the Spring Festival holiday, spandex suppliers still have higher inventory compared to the same period last year, and the sales pressure remains greater than last year. There is also a noticeable divergence in inventory among leading enterprises; some have a healthy inventory of around 30-40 days, while others have inventories of about two months, and some long-held, unsold products are still difficult to sell. Medium and small enterprises experience greater fluctuations in run rate and even larger inventory disparities, with some inventories below half a month, while others remain at 2-3 months.

Due to the weak new orders in fabric mills and the earlier transfer of inventory in the spandex industry to downstream, the spandex industry in March may face certain accumulation pressures whether prices rise or remain stable. Companies need to balance between "accumulating inventory to support prices" and "running volume." Currently, the supply and demand of spandex still struggle to support a market that demands both price and quantity. For most spandex companies facing losses, it may be a reasonable short-term strategy to sustain the previously slight price increase and wait for the downstream consumption and the follow-up of new downstream orders.