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Insight | Time: Sep 17 2020 6:56PM
Where does spandex go?
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Demand for spandex was better than other major feedstock of textiles and apparels in 2020. Stocks of spandex declined more compared with polyester and nylon. Price of spandex 70D-140D-280D surged in Apr driven by sound demand for ear band of mask. Almost all spandex price increased in Aug-Sep, with increment at around 500-1,500yuan/mt.

The COVID-19 greatly impacted global economy and commodities. Demand shrank on the year in many fields. Many developed nations witnessed dramatic economic recession. However, spandex market outperformed. Sales of spandex were very sluggish in the first quarter of 2020 as the production resumption of downstream plants was around 1 month later. The YOY demand shrinkage apparently declined by the end of H1. Supported by surging foreign orders and moderate domestic demand, sales of spandex increased, with sales volume higher than the same period of last year. More descriptions became tight. Supply of super fine denier, spandex 20D, 30D and coarse denier is largely in shortage, and the delivery of goods needs to queue now, but supply of 40D and 140D is loose.

Demand for spandex outperformed in 2020 amid the COVID-19 when other chemical fiber market was weak. What drives the demand and where does spandex go?

Firstly, the pandemic changed our way of lie. Many people wear mask once they go outside. Although the consumption volume of individual mask is small, the demand cardinal is very huge. Demand for spandex from mask and protective clothing hikes. According to the mask production and protective clothing and export volume of mask, more than 3% of spandex demand growth was from pandemic prevention field, with volume above 20kt. In addition, demand from diaper and medical bandage still grows under high rate. 

Secondly, due to the pandemic, increasing people pay more attention to fitness, which resulted into hot sales of elastic fabric. The content of spandex in yoga clothing and sportswear apparently ascends, from 10-25% to 15-25%. Warp knitting and circular knitting machine produces more fabric for sportswear, and winter and autumn wear fabrics add more bare-spandex. Actually, historic low spandex price was the premise for increasing spandex content in downstream textile and apparel market. Turnover of elastic fabrics was sound in China Textile City in Jan-Aug, 2020, while the overall turnover of fabrics in China Textile City shrank by around 30%.

Turnover of elastic fabrics in China Textile City in Jan-Aug, 2020 (Unit: 10,000 meters)
Jan-Aug Total Cotton/spandex elastic fiber Chemical fiber elastic fiber
2019 931 48.7 42.3
2020 666.6 44.8 45.1
Change -28% -8% 6%

Thirdly, exports of textiles and apparels were diversified in Jan-Aug, 2020. Export value of textiles increased by above 30% on the year, and that of apparels reduced by more than 10% y-o-y. By the end of Aug, export value of textiles and apparels rose by 8.1% on the year, mainly driven by textiles. The export value of textiles surged greatly on the year in Apr-Aug, with increment mainly around 10-20%. Exports of textiles rose apparently on the year in Apr-Aug, mainly driven by mask in Apr-Jun and stimulated by improving foreign orders for beddings from abroad in Jul-Aug. Exports of apparels also gradually improved in Apr-Aug.

Exports of textiles and apparels in Jan-Aug, 2020 (Unit: MLN dollar)
Exports Jan-Aug, 2020 YOY change
Textiles and apparels 1874.07 8.11%
Textiles 1047.98 33.43%
Apparels 826.08 -12.86%

Fourthly, looms of spandex downstream market kept increasing. According to incomplete statistics of CCFGroup, new circular knitting machine totals above 1,000 in Chaoshan, Guangdong and Fujian, and content of spandex is high. In addition, circular knitting, warp knitting and covered yarn machines increases a lot in Hubei, Hunan, Sichuan and Guangxi. The growth of downstream machine supports spandex demand.

Fifthly, downstream manufacturers need to replenish when stocks were low. Some spandex is turned into the stocks of grey fabric and textiles and apparels. In addition, speculative buying existed in Q3 when the whole spandex industry chain was rising. Inventory of spandex was transferred to middlemen and downstream fabric mills. Therefore, stocks of spandex decrease and supply of some descriptions becomes tight again.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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