The entire spandex value chain saw weaker demand and cost during as prices of BDO collapsed in late June. Players of spandex value chain were more determined to reduce production with plunging cost, depreciating PTMEG and spandex inventory and weak demand for downstream fabrics.
Supply of PTMEG remained high in China. The settlement of price was passive since Q2, mainly following the price trend of BDO, while the profitability of PTMEG started being feeble after Q2.
Spandex 40D has been unprofitable since Q2. BDO market also witnessed apparent losses after price slumped. The whole value chain suffered deficit. Market players tried to reduce supply to ease the contradiction of supply glut after faced great losses, which could further lower inventory.
More factories scaled down output with pressure from losses and inventory. The whole value chain saw great production curtailment in July, with run rate down to 50-60 per ent. The pressure of mounting inventory weakened after production was cut. Sales improved. The competition under low prices dwindled under losses. Price gradually touched bottom. Price of BDO started stabilizing from mid-Aug. As a result, the whole value chain is estimated to touch bottom in short term.
Downstream demand is supposed to largely increase in traditional peak season Sep and Oct by convention, which may also warm up this year, but the improvement is likely to be pressed. With the expectation of economic recession, weaker consumption and high stocks of downstream and middle stream products, demand is anticipated to grow slowly.
Price of BDO-PTMEG-spandex is expected to touch bottom in short run. Downstream buyers may slightly increase purchasing in expectation of recovering demand, which will lower high inventory burden. However, the specific improvement still needs further confirmation.
The whole value chain has witnessed a new round of capacity expansion. Producers may adjust unbalanced supply/demand pattern by altering supply. With supply glut, prices are expected to shiver near the cost line for a long period.
