Spandex: The supply and demand pattern ushered in marginal improvement, and the industry prosperity continued to pick up

1. Spandex production process

Polyurethane fiber is a chemical synthetic fiber with excellent performance, which has a large yield, low elastic modulus, good fatigue resistance and other excellent properties, adding a small amount of spandex (a general use content of 5%-25%) in chemical fiber products can significantly improve the elasticity and comfort of chemical fiber products, so it is known as "MSG type" fiber. Its price is also much higher than other varieties of synthetic fibers.

At present, there are four main production processes of spandex: solution dry method, solution wet method, chemical reaction method and melt spinning. Among them, dry spinning is the most widely used spandex spinning process in the world, and its output accounts for more than 80% of the world's total spandex production. The dry spinning technology is mainly represented by Invista (formerly DuPont) in the United States, Hyosung in South Korea, and Toyo Textile in Japan. Invista and Hyosung use continuous polymerization and high-speed spinning, which are better in quality than conventional batch polymerization and medium-speed spinning, and have high output and low cost. Toyo Textile uses batch polymerization and continuous spinning, which is adopted by some spandex enterprises in early production in China, such as Huafeng Chemical and Yantai Spandex. With the technological progress of domestic spandex enterprises, the production technology widely used in the new production capacity of domestic spandex is continuous polymerization dry spinning technology.

Continuous polymerization dry spinning technology is mainly to mix the main raw materials liquid PTMG and liquid MDI in a static mixer with a certain ratio, and then carry out the first reaction in a static reactor, and the reactant is called prepolymer; After stable storage for a period of time, the prepolymer was dissolved with solvent DMAC, and then a mixed organic amine solution consisting of chain extender and chain terminator was added to the reactor for a second reaction. In order to improve the characteristics of spandex stock solution, some additives are added to the polymer generated by the secondary reaction, and the current conventional additives are mainly antioxidants, heat resistant agents, matting agents, whitening agents, dye AIDS and so on. After aging, the stock liquid of this part is transported to the spinning process, squeezed by the metering pump to form a trickle of stock liquid into the spinning tube, in the high temperature of the tube, the solvent DMAC is evaporated to form a wire bundle, and the silk bundle is oiled and wound by the winding equipment to form a product.

Energy consumption is the core factor that causes the cost difference between different specifications of spandex. The measurement unit to characterize the thickness of spandex yarn is Denier, referred to as D, which refers to the weight of 9000 meters of fiber under standard conditions: if 9000 meters of fiber weighs 40 grams, it is defined as 40D. Spandex fine denier is mainly 10D-50D, medium/coarse denier is mainly 70D-570D and so on. The most common spandex models on the market are conventional and heat-resistant. The cost difference of different specifications of spandex is mainly in 1) raw and auxiliary materials: the main raw materials are the same, only slightly different in the oil agent, the thicker the silk, the less the oil dose. Therefore, the coarser the silk, the lower the cost; 2) Core factor energy consumption: the coarser the silk, the higher the capacity, the less energy consumption per unit capacity, and the lower the cost. In addition, a characteristic of dry spinning spandex is that the solvent DMAC is evaporated in the spinning tube, the coarser the silk, the more solvent contained in the spinning liquid (the amount of solid is the same), then the heat required for evaporation is higher, and the production cost will increase; 3) Packaging materials: different sizes of spandex wire are stored in different quantities in the carton. Such as 550 grams of products can put 60 volumes in a box, and 600 grams of a box can only put 48 volumes, the weight of the whole box of spandex wire will be different, the cost difference in this respect is about 200 yuan -2000 yuan/ton.

2, the epidemic catalyzed demand growth, spandex profitability significantly improved

Overseas demand is recovering, and demand for spandex is growing rapidly

The most important downstream demand for spandex is still from the textile and clothing category, more than 50% of the world's textiles and clothing contain spandex components, about 60% of the domestic export textiles and clothing contain spandex components, "ammonia-free cloth" will become the future of high-end textiles and clothing development direction. From the downstream of spandex, warp knitting and round knitting are mainly used for knitting underwear, socks, sportswear, swimsuits, etc. Wrapping yarn is mainly used for casual wear, jeans, etc. Lace is mainly used for decorative lace, elastic and so on. Wrapping yarn and circular machine are the main areas of spandex weaving demand, accounting for 33% and 31%.

The epidemic has prompted demand for epidemic prevention materials, and apparent consumption and exports of spandex have continued to increase. In 2020, due to the impact of the new coronavirus epidemic, the global demand for epidemic prevention materials has grown rapidly, and China's textile industry has rapidly adjusted its production strategy to achieve upstream and downstream supporting, producing and transferring a large number of epidemic prevention materials to meet the global concentrated and large demand. In the context of foreign production capacity limited by the deterioration of the epidemic, a large amount of demand has been transferred to China. Since the second quarter, textile and clothing exports have increased significantly, mainly driven by textile anti-epidemic materials, spandex as one of the raw materials for masks, and demand has increased significantly. In 2020, the apparent consumption of spandex in China is about 680,000 tons, an increase of 5%. Domestic spandex exports were 65,000 tons, up 4% year-on-year. Since 2021, the prospect of the epidemic situation abroad is still unclear, the demand for epidemic prevention materials is expected to continue to grow, and the export volume of spandex is expected to maintain a high growth. According to Longzhong Information forecast, China's 2021 spandex exports are expected to be about 75,000 tons, an increase of 15%.

With the recovery of overseas demand, demand for spandex has grown rapidly since June 2020. In the first half of 2020, the new coronavirus epidemic swept the world, causing a major impact on the economic and trade patterns of countries around the world, China's textile and clothing exports continued to face the dilemma of order cancellation and reduction in the second quarter, and spandex exports fell sharply in the second quarter. In the second quarter of 20 years, the epidemic situation in China was basically controlled, and the economic operation returned to normal, while the overseas epidemic situation worsened, which led to a substantial increase in the export of textile clothing in China. Driven by overseas demand, China's spandex demand has grown rapidly since June 20, and the monthly apparent consumption and export volume of domestic spandex are significantly higher than the level of the same period last year.

Spandex inventory is at a low level and is expected to usher in a replenishment cycle

20 years spandex industry experienced a tired library to library, is expected to usher in the replenishment cycle. Affected by the epidemic at the beginning of 20 years, the operating rate of the downstream loom plummeted, most domestic enterprises stopped production, personnel isolation and logistics were blocked, downstream demand was greatly depressed, and spandex inventory rose rapidly in the first quarter of 20 years, and the inventory reached 92,000 tons in mid-April. In the second quarter, the domestic epidemic gradually controlled, production and sales were repaired, spandex inventory declined rapidly, and the inventory dropped to 62,000 tons in early May, but the demand was under pressure due to the cancellation and reduction of downstream textile orders, and the inventory continued to rise from May to August. Since June 20, the recovery of overseas demand has led to a rise in domestic spandex demand, spandex inventory has continued to decline since mid-August, as of early March 21, spandex inventory has dropped to 25,000 tons, at a historic low, the industry ushered in strong replenishment expectations, under the expectation of continued recovery of overseas demand, domestic spandex is expected to usher in a replenishment cycle.

Spandex price spreads rose to historic highs and profitability improved significantly

Spandex prices have continued to rise since October 2020, with spreads rising to historic highs. In the first half of 2020, spandex market prices were relatively stable. However, after entering the second half of 2020, the recovery of overseas demand led to the rapid rise of domestic textile demand, spandex inventory continued to decline, spandex prices showed a rapid rising trend, and spandex 40D prices continued to rise from 28,000 yuan/ton in mid-August to 45,500 yuan/ton on April 2, 2021. Spandex 40D price spread since the second half of 20 years also showed a continuous upward trend, profitability improved significantly, cut to April 2, 2021, spandex 40D price spread rose to 24004 yuan/ton, in the historical ten-year 98% quanta, the industry boom quickly rebounded.

Raw material prices continue to rise, the cost side to support spandex prices. PTMEG is the main raw material cost of spandex, driven by the rise in the price of upstream raw materials BDO, PTMEG prices have continued to rise since August 20. The price of BDO rose from 7575 yuan/ton in early August 20 to 29,200 yuan/ton in early April 21, an increase of 285%, while the price of PTMEG rose 156% in the same period, and the price of pure MDI rose sharply from August to mid-October. Rising upstream raw material prices combined with downstream demand recovery, spandex prices and price spreads have risen rapidly since October 20. In 2021, the global crude oil market is expected to maintain a tight balance, crude oil prices are expected to remain in the $55-65 / barrel range, spandex raw material prices are expected to maintain an upward trend, and the cost side supports spandex prices to continue to rise.

3, the supply pattern ushered in marginal improvement, industry concentration continues to increase

Spandex expansion cycle is coming to an end, and the industry supply pattern is expected to improve. In terms of production capacity, from 2012 to 2020, the domestic spandex production capacity increased from 505,000 tons to 948,000 tons, a compound growth rate of 7.4%. In terms of production, the domestic spandex production in 2020 is 758,000 tons, an increase of 1% over the same period, and the apparent consumption of spandex is 682,000 tons, and the industry still maintains an oversupply situation. In terms of operating rate, in recent years, the domestic spandex operating rate has been maintained at about 80%, but the enterprise differentiation is serious, the operating rate of leading enterprises is close to 100%, and the operating rate of small and medium-sized enterprises is generally below 50%. According to Baichuan Yingfu data, it is expected that the new capacity in 21 years has Huafeng Chemical 40,000 tons (put into production in the second half of 21), 22 years of new capacity of 60,000 tons (expected to put into production at the end of 21), including Xinxiang chemical fiber 30,000 tons, Taihe new material 30,000 tons, 21-22 years spandex capacity growth rate of 4%, 6%, respectively. The growth rate of production capacity has slowed down significantly, new production capacity has been put into production in an orderly manner, and the industry supply pattern is expected to usher in marginal improvement.

Looking back at the historical profit cycle and expansion cycle trend of spandex, the driving force of the expansion has changed. Nearly a decade, China's spandex industry after three expansion cycles: 1) 2011-2012, spandex demand recovery growth, the price spread expanded to nearly 30,000 yuan/ton in 2011, driven by high profitability in 2012 spandex capacity growth rate of more than 10%; 2) In 2013-2014, spandex price spread ushered in a stage high again, with a price spread of nearly 22,000 yuan/ton, leading enterprises took the lead in expanding production, and the annual production capacity growth rate exceeded 17% in 2014; 3) In 2019, ammonia production capacity increased by nearly 10%, but the spandex price spread did not show signs of rebound, but remained at 13,000 yuan/ton left and right. It can be seen that different from the passive expansion of enterprises driven by profit in the past, this expansion is the initiative of leading enterprises with cost advantage to expand production to seize market share.

Leading enterprises bucked the trend to expand production, and the industry concentration continued to improve. After 2016, spandex industry profitability continued to deteriorate, small and medium-sized enterprises long-term losses, has not been able to expand production or transformation conditions, high costs have to reduce production, stop production and even apply for bankruptcy. Leading enterprises continue to expand at the bottom by relying on the accumulated capital advantages in the early stage, go against the trend, accelerate to seize market share and consolidate their competitive advantages. With the gap between cost and scale widening, the differentiation of enterprise operating rate is obvious, and the industry concentration continues to increase. By 2020, the total production capacity of spandex is about 890,000 tons, of which the proportion of CR4 (according to capacity caliber statistics) has increased to 59.9%, and the proportion of CR8 (according to capacity caliber statistics) is 79.7%. Huafeng Group, Xinxiang egret, Xiaoxing Group has initially formed a three-pillar structure.

The scale advantage of leading enterprises is prominent, and the living space of small production capacity is limited. From 2016 to 2019, the spandex price spread has been maintained at a low level, and small production capacity enterprises have been gradually eliminated due to high production costs, and only a small number of enterprises have survived with differentiated products. With the continuous expansion of leading enterprises to seize market share, the survival space of small production capacity is squeezed, in 2016, the domestic spandex capacity of more than 100,000 tons accounted for only 18%, and in 2020, it rose to 51%, and leading enterprises have basically occupied half of the country. It is expected that the concentration of spandex industry will continue to increase with the steady expansion pace of leading enterprises, and the small production capacity with higher cost lines will continue to be eliminated, and only some small and medium-sized enterprises can survive in the competition with differentiation strategy.