Tianfeng Securities: Spandex profits are at the historical bottom range, focusing on layout opportunities against the backdrop of "anti-involution"

According to the Zhitong Finance APP, Tianfeng Securities released a research report stating that in the first half of 2025, due to the increase in supply in the spandex industry and the impact of tariff policies on downstream demand, the prices of spandex products will operate at historically relatively low levels. Meanwhile, according to Zhuochuang Information (25/8/1), the average gross profit loss per ton in the spandex industry is about 6,000 yuan, with the industry experiencing cumulative losses for as long as 3.5 years. Considering factors such as production efficiency, some new production capacities of spandex enterprises in China have been delayed or reduced; and due to severe internal competition in the industry in recent years, the selling price and profits of spandex products have been affected, leading to a continuous increase in the elimination of production capacity in the later stages of the industry. Against the backdrop of "anti-involution," it is important to focus on listed companies located on the left side of the cost curve. The main points of Tianfeng Securities are as follows: China's spandex supply is highly concentrated, and current prices are operating at relatively low levels After several rounds of capacity expansion, China is the largest producer and consumer of spandex in the world. With the rapid development of China's textile industry, the domestic spandex industry has entered a period of rapid growth, with national production capacity increasing from 89,000 tons to 1.35 million tons by 2024. By 2024, global spandex production capacity will increase to 1.75 million tons, a year-on-year increase of 7%, with the increase mainly contributed by China, which accounts for 77% of global capacity. China's spandex industry is highly concentrated, with a CR5 of 79%. In recent years, industry capacity has accelerated towards the leading companies, and by 2024, the top five spandex producers in China will have a combined capacity of about 1.07 million tons, accounting for 79% of the national total capacity, an increase of 18 percentage points from the CR5 of 61% in 2019. The current industry operating rate is 80%, and the price differential is at a low level. The industry is generally in a state of loss, with profits at historically low levels In the first half of 2025, due to the increase in supply in the spandex industry and the impact of tariff policies on downstream demand, the prices of spandex products will operate at historically relatively low levels. Meanwhile, according to Zhuochuang Information (25/8/1), the average gross profit loss per ton in the spandex industry is about 6,000 yuan, with the industry experiencing cumulative losses for as long as 3.5 years. New production capacity is delayed or reduced, and the elimination of capacity may continue to increase Considering factors such as production efficiency, some new production capacities of spandex enterprises in China have been delayed or reduced; and due to severe internal competition in the industry in recent years, the selling price and profits of spandex products have been affected, leading to a continuous increase in the elimination of production capacity in the later stages of the industry. In recent years, the demand for spandex has grown rapidly, and downstream penetration rates continue to rise Due to its good elasticity, spandex has become an essential elastic fiber for high-performance fabrics that pursue convenience and dynamism. With people's pursuit of fashion trends and comfort, as well as the upgrading of consumption concepts, the demand for spandex in China continues to increase. In 2005, China's apparent consumption of spandex was 121,000 tons, and by 2024, the consumption scale will grow to 1.027 million tons, with a CAGR of 11.9% from 2005 to 2024. Against the backdrop of "anti-involution," focus on listed companies located on the left side of the cost curve The production costs of spandex mainly include raw materials, manufacturing expenses, labor, and freight, with differences mainly concentrated in non-raw material costs such as energy consumption and depreciation. In terms of energy consumption, the difference in electricity consumption per ton for different companies producing spandex can reach 3,390 kWh. In addition, according to Huafon Chemical's announcement, the company is building a differentiated spandex project in Chongqing with an annual capacity of 250,000 tons, with a total investment expected to be 3.8 billion yuan, translating to a per-ton depreciation cost of only 1,520 yuan/ton The gap with higher industry players can reach 2,300 yuan/ton. Target Aspect Huafon Chemical (002064.SZ): The company has been deeply engaged in the polyurethane industry for many years, with production bases established in Chongqing and Zhejiang. Currently, its spandex production capacity and output rank second globally and first in China, while its polyurethane raw liquid and adipic acid output are also the highest in the country. As of 2024, the company has a spandex production capacity of 325,000 tons (with 150,000 tons under construction), an adipic acid production capacity of 1,355,000 tons, and a polyurethane raw liquid capacity of 520,000 tons. The company operates steadily, with significant competitive advantages in scale and cost, industrial integration, and technological innovation, making it a leading enterprise in the polyurethane industry. Xinxiang Chemical Fiber (000949.SZ): The company mainly produces biomass cellulose filament and spandex fibers, and is a leading enterprise in the biomass cellulose filament industry. The company's spandex fiber production capacity is 200,000 tons, making it the fourth largest spandex producer in China. The company's differentiated spandex production lines are internationally leading, and the quality of differentiated spandex, such as ultra-fine denier and ultra-soft, has received high market recognition. Risk Warning Risks of fluctuations in spandex raw material prices, the calculations in this report are based on actual occurrences, safety and environmental risks, and risks of continued economic downturn triggered by overseas economic decline