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Insight | Time:Oct 25 2017 10:17AM
Spandex market meets resistance in increasing further
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Stimulated by shrinking supply and tolerable demand in the third quarter, price of spandex rose apparently in recent three months, with increment for 20D-40D staying around 10%. Supply of spandex increases apparently in the fourth quarter compared with Q3, and demand needs to see the continuity of orders in later period. Price of spandex is supposed to meet resistance in rising further, more likely to consolidate at high level.

Price change of major spandex
Unit: yuan/mt 20D 30D 40D
28-Jul-17 40,500 39,000 33,500
24-Oct-17 44,500 43,000 38,000
Change (yuan/mt) 4,000 4,000 4,500
Change (%) 9.90% 10.30% 13.40%

Cash flow and run rate of spandex plants increase
Cash flow of spandex 40D accumulated apparently after spandex price successively moved up, and that in plants with high efficiency, low energy consumption and financial cost was higher. Operating rate of spandex industry has ascended to around 90%, up by 26% compared with late-Aug. Zhejiang Sihai has not resumed production amid technology upgrade, which may finish technology upgrade in Nov-Dec, and Yantai Tayho’s partial unit did not restart production too. Many new spandex units are scheduled to start operation in the fourth quarter. Hyosung Quzhou’s 2nd phase spandex project covering 20kt of capacity is expected to start production in end-Nov or Dec, and Ningxia Yadi’s new spandex plant is anticipated to start partial production this year.

Sales ratio declines, and inventory accumulates slightly
Sales ratio of spandex plants was mainly above 150% in Aug-Sep while dropped from mid-Oct after some weavers and dealers focusing on lowering earlier stocks. Inventory of spandex remained low now but has mounted by around 3 days compared with early-Oct.

Downstream weavers witness moderate orders in Oct and the continuity needs observation
Downstream weaving sectors performed moderate in recent period. Operating rate of most downstream plants was higher than the same period of last year. Orders in Oct were tolerable, but may face reducing risk after Nov. Domestic orders may weaken after "Double 11", and export orders may come to an end after Nov.

Current operating rate of circular knitting plants in Zhejiang and Jiangsu was around 50-60%, which has rose obviously after Jul, while run rate of circular knitting plants in Foshan, Guangdong was only around 40%. Operating rate and orders in Nov should be noted.

Operating rate of large integrated air covered yarn plants in Xiaoshan and Shaoxing declined to around 70% from 100% with rising nylon filament yarn price and decreasing seasonal demand, and run rate of air covered yarn also slightly dipped. Core-spun yarn plants in Zhangjiagang mainly ran at around 70% of capacity, mainly producing orders including cotton. Local demand for spandex 70D slightly dwindled, while that for 40D slightly improved. In Zhuji and Yiwu, run rate of conventional covered yarn plants remained above 70%, and run rate of small circular knitting plants was above 80% in Yiwu.

Operating rate of warp knitting plants in Guangdong and super soft fabric plants in Haining was around 70-80%. The continuity of order and high run-rate of super soft fabric should be noted when the peak season started early this year but the Spring Festival is late this year, not ruling out sharp reduction after end-Nov.

All in all, operating rate of spandex industry has rose to around 90% now, and new capacity is supposed to be intensive in the fourth quarter, but downstream run rate is largely stable. Eyes are suggested to the order continuity. With successively increasing spandex price, most downstream buyers only procure to cover the most pressing demand, with falling demand for spandex. Some dealers only focus on slashing earlier stocks. Price of spandex is anticipated to consolidate at high level in short run supported by low inventory, and price of goods with tight supply may move up. Overall spandex market is likely to meet great upward resistance. 
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