China’s spandex prices squeezed by high supply.

In 2024, China’s spandex market began with sluggish demand and low prices. While suppliers were good with high deliveries, sales slowed after the Chinese New Year holiday. This led to a slight decline in production-to-sales ratio for the quarter. Spandex prices remained weak throughout the first quarter, barely exceeding production costs. Short-term price increases attempted by suppliers were countered by excess supply in the industry. By March, new product arrivals caused prices to dip further.

As per CCF Group report, despite weak prices, spandex producers saw some improvement in cash flow. This is because PTMEG, a key raw material, saw significant price drops thanks to new production capacity. While spandex prices fell 3,000 yuan/mt, PTMEG prices dropped by 4,900 yuan/mt.

Production capacity also increased in Q1 2024, reaching nearly 1.3 million tons in China. This, combined with improved cash flow, led to a rise in operating rates. By March, industry operating rates reached 88 per cent, a 15 per cent increase from January. Further restarts of idle production units are expected in Q2.

Looking at the downstream market, demand for spandex in textiles and apparel has stabilized. Domestic sales growth slowed to normal levels, while exports continued strong year-over-year growth. Fabric producers reported active production for both domestic and export orders, with operating rates reaching 60-70 per cent by March.

The outlook for Q2 2024 suggests continued low spandex prices. The significant increase in production capacity, coupled with potential slowdowns in seasonal restocking, could lead suppliers to cut production to maintain prices or minimize losses.