CICC: Spandex companies face force majeure, pay attention to investment opportunities in the spandex industry

According to the report released by China International Capital Corporation (CICC), based on Baichuan Information, an act of force majeure occurred this week at an spandex factory in Zhejiang, and the related incident is still being processed. The downtime and impact are yet to be further updated. The spandex industry is at a low point, with prices and profits awaiting recovery. In the medium to long term, the industry is expected to recover in 2026-27, while the short-term force majeure event may lead to supply-demand tension. In terms of targets, Huafon Chemical (002064.SZ) and TAYHO GROUP (002254.SZ) are the key focuses. CICC's main viewpoints are as follows: The supply-demand balance of the spandex industry still needs to be repaired After a high boom in the industry in 2020-21, the industry entered a new round of rapid expansion cycle, with production capacity increasing from 892,000 tons in 2020 to 1,402,000 tons in 2024, a CAGR of approximately 12.0%. Among them, the production capacity growth rate in 2023 reached as high as 19.2%. On the other hand, although spandex, as an elastic fabric, has been increasingly used in chemical fibers, the demand growth rate is lower than the supply growth rate. Against this backdrop, the spandex industry's prosperity continues to be sluggish. CICC expects that in 2025-26, companies such as Huafon and Xiaoxing will still expand production and upgrade technology, and the industry is in the late stage of this round of production. With steady demand growth, the industry is expected to emerge from the trough in 2026-27. Profit bottom awaits recovery As of the end of September 2025, the price of spandex was only 23,000 yuan/ton, at a historical low. Although considering the simultaneous decline in raw material prices, from the perspective of product profitability, CICC estimates that the spandex price spread at the end of September was 10,500 yuan/ton, with leading enterprises' net profit per ton being only around 1,200 yuan/ton. In this scenario, the entire industry may be in a state of slight cash flow loss. CICC believes that this operational filling is unsustainable, and the industry may seek a new balance through measures such as operating rates. In the medium to long term, spandex profitability has significant recovery space and potential. Risk factors Textile and apparel demand may fall short of expectations, and production capacity may accelerate expansion