Spandex oversupply looms as demand cools

The spandex industry in China is facing a potential oversupply situation as production capacity ramps up and downstream demand weakens.

While spandex production is sufficient, with high operating rates, a seasonal shift is causing lower demand for lightweight fabrics typically used in summer. This mismatch is leading to accumulating inventory at mills producing thicker fabrics for fall and winter.

Despite adequate supply, spandex suppliers are grappling with high inventory levels, putting pressure on cash flow due to declining prices. This price decrease is steeper than the decline in raw material costs, squeezing profit margins.

Looking downstream, weaving and knitting mills are experiencing a slowdown in order follow-ups, indicating a potential drop in demand for spandex. This seasonal trend, coupled with high temperatures, could further dampen demand.

China's textile and apparel exports have shown some improvement in 2024, but growth remains sluggish. Domestic sales are also facing a slowdown compared to the strong performance of last year.

The outlook for the spandex industry is cautious. With abundant supply and weakening demand, spandex prices are expected to continue their downward trajectory. Inventory levels are likely to rise further, putting pressure on suppliers. Monitoring factory shutdowns and new downstream orders will be crucial in the coming days to gauge the severity of the situation.