Under normal circumstances, April to July is the off-season for spandex. Downstream demand continues to decrease, and prices continue to fall. Spandex 40D has dropped from 37,000 yuan/ton at the end of April to 33,500 yuan/ton, and spandex 20D has dropped from 45,500 yuan/ton. to 41,500 yuan/ton, a drop of nearly 10%. As the saying goes, “If it falls for a long time, it will rise.” Spandex, which has been silent for nearly four months, finally has some movement, and price increase notices are coming in waves.
Due to the sharp increase in the prices of raw and auxiliary materials, production costs continue to rise. In order to alleviate the company’s operating pressure, starting from August 1, 2017, all specifications have been increased by 1,000 yuan/ton. ——Lianyungang Eucommia Xinaoshen Spandex
Due to the rising costs of spandex raw materials, packaging and transportation, the cost has increased significantly. In order to reverse the pressure brought by losses, starting from August 1, 2017, all specifications (except individual specifications) have been increased by 1,000 yuan. /Ton. ——Zhuji Huahai Spandex
Forced by the price increase of raw materials, the company decided to increase the price of all products by 1,000 yuan/ton starting from August 1st, and will increase it again on August 15th. ——Hyosung Spandex
On the one hand, this price increase is caused by the increase in raw materials. The price of pure MDI, one of the raw materials for spandex, has risen from 23,700 yuan/ton at the beginning of the month to 25,000 yuan/ton. Although the increase is not large, it is important for current operations. For spandex companies that are under great pressure, this is also one of the reasons forcing them to increase prices. In addition, costs and expenses such as energy, packaging, and transportation have also increased significantly. Under the dual squeeze of falling product prices and rising costs, the profits of spandex companies have been further compressed.
On the other hand, the author believes that the more important reason for this price increase comes from the joint efforts of spandex companies to limit production and protect prices. So what prompted them to use this strategy?
Let’s first look at a set of data:
Judging from Huafon spandex data in 2016, its domestic spandex market share increased from 18% to 23%. Its total revenue increased by 11.65% year-on-year to 2.844 billion yuan. However, its net profit loss was 303.8 million yuan, a significant year-on-year increase. down 219.55%.
Taihe New Materials, another listed company that specializes in spandex, achieved sales revenue of 1.092 billion yuan from the spandex segment in 2016, down 3.24% year-on-year, accounting for 69.07% of the company’s total sales. Its gross profit margin was 11.66%, down 6.81 percentage points year-on-year.
Judging from the above data, the spandex industry is facing many difficulties. Even though sales have increased, gross profits have continued to decline. Although the current prices of various specifications of spandex products have increased significantly compared with the same period last year, they still cannot reverse the pressure of corporate losses. This is the operating situation of large enterprises, not to mention other small businesses with small scale and poor R&D capabilities.
Under this circumstance, it is understandable for companies to take measures to limit production and protect prices. Manager Fang of a spandex company in Zhuji told the author: “Currently, spandex companies are under heavy inventory pressure. This time our company has reduced its production capacity by 6,000 tons. Insuring the price, the actual transaction price should increase by about 500 yuan/ton. The specific price will depend on the response of the downstream market. If the response is good, it will increase by another 500 yuan. If it is not as good as expected, the price will only stagnate.”
In short, the author believes that a new wave of spandex price increases has arrived, but as for the future, will spandex prices continue to rise or stagnate? It depends on whether the downstream fabric market buys it!
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