After the eventful year of 2016, spandex finally entered 2017 with price increases. Since the beginning of this year, spandex has followed the pace of polyester filament, nylon, viscose and other raw materials and started a price increase mode.
Is spandex really as glamorous as it seems? Are there still some unspeakable secrets hidden?
1. Spandex raw materials continue to rise, and spandex companies suffer serious losses
Since October last year, the raw material pure MDI market has continued to surge due to the Wanhua Yantai maintenance accident. Since December last year, the pure MDI market price has increased from 21,750 yuan/ton in December to the current 24,000 yuan/ton. Only two In the past month, the increase has been as high as 2,250 yuan/ton; while the market price of another raw material, PTMEG, has also risen, rising from 13,200 yuan/ton to 14,200 yuan/ton, with an increase of about 1,000 yuan/ton. Cost pressure continues to increase, which is even worse for spandex companies that are already losing money!
2. Rising logistics, transportation and packaging costs have intensified the cost pressure on spandex companies
Rising freight rates: From September 21, 2016 to July 31, 2017, the traffic control and transportation department focused on carrying out three “special actions” nationwide, namely, a one-year special action to rectify the modification of trucks in the Philippines and to rectify highways. A two-year joint law enforcement operation for vehicle transporters was launched to carry out a special operation against illegal overloading and overloading of trucks.
Taking 100 yuan/ton as an example, the freight is 3850 yuan/car. Now the total freight amount remains unchanged, and the actual load is: [Total weight (49T) – Wagon (16.5)] * 4/4.5 = Actual load (28.8T), The unit price of freight is 3850 yuan ÷ 28.8T = 133.6 yuan. The freight unit price will be increased by about 33.6%. With the corresponding increase in taxes, the freight price will increase by 35%.
Rising packaging fees: The “price increase” in the carton industry in 2016 can be said to have affected the whole body. In addition to the suffering of major carton factories, it has even affected downstream customers, which has also caused constant pressure on spandex production costs. Aggravated.
3. New production capacity was successfully put into operation, and overcapacity worsened
In November 2016, the second phase of the Binhe New District Hengyi’s annual output of 120,000 tons of high-performance differentiated spandex fiber project was under construction.
In December 2016, the second phase of the Xinxiang Chemical Fiber 20,000 tons/year spandex fiber project was officially put into production at the end of the year. The manufacturer stated that it had already put into production, with a production capacity of approximately 6,000 tons/year, and would continue to increase production slightly in the future.
After reading the above information, one can’t help but think that the spandex industry is booming. With so many big companies investing in new production capacity, it must be a profitable product. However, a piece of news about Woori Holdings at the end of last year was shocking. As we all know, in the middle of last year, Yuri Holdings, which had failed to enter the gaming industry, increased its investment by 700 million and returned to its old spandex business. It thought it was not doing its job properly and finally returned to the right path, but unexpectedly, less than half a year later, Yuri Holdings persisted and could not Live, announced on the evening of December 14 last year that due to the current downturn in the spandex market, in order to reduce losses, the company’s holding subsidiary Jiangsu Shuangliang Spandex began to suspend production in one workshop on December 7, with an annual production capacity of 4,200 tons, and another Jiangyin Lili Special Fiber Co., Ltd., a subsidiary, began to suspend production in its second workshop on December 12, with an annual production capacity of 7,000 tons.
Only a balance between supply and demand can create a healthy market. Nowadays, the annual production capacity of the spandex market is gradually increasing, from 510,000 tons/year in 2015, to 530,000 tons/year in 2016, and to an estimated 690,000 tons/year in 2017. , far exceeding the downstream demand of 480,000 tons/year, and supply > demand will inevitably lead to overcapacity. Nowadays, the supply-side structural reform focusing on cutting overcapacity, destocking, deleveraging, reducing costs and making up for shortcomings has officially begun. Whether the spandex industry can survive this severe reform is also a matter of concern. .
Therefore, the “good start” of spandex is not as glamorous as it seems on the surface. Price increases will result in price increases. However, if downstream companies do not buy it, the overall growth of the spandex market in the future will be very limited.
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