Pure MDI in July: Fire in July, Weiyang in August

July Market Review :

After experiencing a small After the market rebounded, in July, the domestic pure MDI market price continued its downward trend. As of August 2, the quotations of domestic mainstream agents were 19,800-20,500 yuan/ton, compared with 22,800-23,000 yuan/ton in early July, a decrease of 2,500-3,000 yuan/ton within the month, a drop of 11-13%.

Supply side:At the beginning of July, some MDI distillation units in Shanghai were shut down for maintenance, and mainstream manufacturers raised the guidance price of pure MDI in July, and mainstream agents raised their offers in response to the trend. After that, due to the weak support from the downstream demand, most pure MDI manufacturers made shipments at a profit. The market price of pure MDI loosened and fell weakly within the month.

Demand side:In the second half of June, the pure MDI trading market picked up. The downstream manufacturers were more active in stocking up, and the orders were concentrated and increased. This gave the pure MDI market support at the end of June and the price went up. In the first ten days of July, the supply of pre-orders was delivered one after another, and the social inventory of pure MDI increased. The attitudes of the cargo holders are divided, and some operators are offering profit to promote the negotiation, and the market price of pure MDI is loose. Downstream manufacturers are slowly consuming their stocks, and the buying momentum has turned weak. In July, the demand for goods from downstream manufacturers has shrunk.

• Spandex industry: July, spandex Factories continue to reduce their burden and production. The overall load level of the industry has dropped from around 80% at the beginning of the month to 60-70% at the end of the month. Despite this, spandex manufacturers as a whole are still facing greater pressure on finished product inventory and loss pressure. As of the end of July, spandex The average inventory of manufacturers has risen again to around 50 days; the main reason is the sluggish demand from the terminal weaving industry of spandex, as well as the high temperature weather and the power restriction measures of some downstream weaving factories of spandex.
• Slurry and sole solution industry: July is the traditional off-season for the slurry and sole solution industry. This year, affected by the epidemic and the downturn in terminal consumption, the "off-season is even weaker". During the month, the overall load of the slurry and shoe sole liquid industry decreased and remained low (the shoe sole liquid dropped to 40% to 50%; the overall load of the slurry industry was around 50%).

August Market Outlook

Supply side:In July, some plants in Shanghai were shut down for maintenance, and in the second half of the month, some MDI manufacturers’ plants dropped slightly. The output of the month fell month-on-month, and the pressure on manufacturers’ inventory was relieved. In addition, manufacturers lowered the listing price of pure MDI in August. It is expected that suppliers will continue to release inventory and maintain shipments in August.

Demand side:

Apparel/Spandex: July is hot, which means that the weather in July of the lunar calendar (corresponding to August in the Gregorian calendar) will start to cool down from the hottest. However, the hottest July is still hot, and consumers’ demand for autumn clothing has not yet come. However, for the garment manufacturing industry, according to August of previous years, orders for autumn and winter clothing will begin to be issued one after another. For this year, the impact of negative factors such as the domestic epidemic situation and logistics on the downstream textile and garment industry of spandex continues to weaken, and sportswear benefits from a low base.The growth rate of demand is expected to lead the overall apparel industry. The marginal improvement of casual apparel and the effect of destocking are obvious. These are areas with high spandex content. It is expected that the domestic spandex industry will hardly show high growth in the second half of the year, but the recovery of spandex demand is still expected to be realized.

Slurry and Sole Dope:According to the current situation, it is expected that the demand of the domestic slurry industry will remain weak in August. On the macro level, the size and sole solution industry has a greater correlation with the consumption willingness of the terminal textile shoes and clothing. According to the latest data on social retail sales in June, domestic social retail sales in that month increased by 3.1% year-on-year and 15.49% month-on-month. In June, the domestic consumer confidence index fell by 27.6% year-on-year, reflecting that the overall domestic consumer confidence is still weak. However, the month-on-month increase of 2.4% shows that consumer confidence is gradually emerging from the shadow of the epidemic in April and May.

In summary, we expect Domestic pure MDI's support from the demand side is still weak overall. Industry players are looking forward to the arrival of "September Giving Clothes" to the pre-market of pure MDI-related industries and the terminal consumption of clothing, shoes and apparel in the long period of "August". Further pick-up in demand.