Performance of Spandex Sector Improves Rapidly

Zhejiang Huafeng Spandex Co., Ltd. (SZ: 002064) and Sichuan
Sofcra Special-Typed Fiber Co., Ltd. (SZ: 000584) as major
listed spandex companies in China have recently published their
performance statements for the first quarter of 2007. The
main-business revenue of Zhejiang Huafeng Spandex Co., Ltd. in
the first quarter was RMB332 million, an increase of 209.84% over
the same period of 2006. The net profit was RMB75.3937 million,
an increase of 47 312.36%. The per-share earning was RMB0.53,
an increase of 35 293.33%. The main-business revenue of Sichuan
Sofcra Special-Typed Fiber Co., Ltd. in the first quarter was
RMB158.6118 million, an increase of 113.61% over the same period
of 2006. The net profit was RMB13.1016 million, an increase of
550.92%. The per-share earning was RMB0.043.  
   Experts say that the performance growth was made mainly
because the selling price of product was higher than the same
period of 2006 due to the rehabilitation of the spandex sector.
   The price of spandex in the domestic market experienced a
long-time reduction before May 2006. The product price once
dropped to lower than the cost price and the entire spandex
sector suffered loss. Starting from May 2006, the spandex market
in China recovered gradually and the price went up. The price
of spandex 40D increased all the way from around RMB49 500 per
ton to RMB63 000 per ton in the second half of 2006 and has
presented a trend of accelerated rise in 2007. The price reached
RMB77 000 per ton on January 15th. It saw another rise of RMB5
000 per ton on January 17th and still another rise of RMB1 000
per ton on January 18th to reach RMB83 000 per ton. After the
Spring Festival, it got as high as over RMB90 000 per ton. In
less than three months, the average price of spandex increased
by nearly RMB30 000 per ton with a growth of almost 50%. The price
of raw materials including PTMEG (polytetramethylene ether
glycol) and pure MDI (diphenylmethane diisocyanate), however,
basically had no great changes. The performance improvement
accomplished by spandex producers was therefore far beyond
expectations.
   Not many spandex projects are being constructed in China
today and there will be no great capacity expansion in 2008. The
possibility for vicious competition like the one in the previous
two years is not great in the spandex sector. Even if some
enterprises intend to launch spandex projects, it will take at
least more than one year and a half to complete them. Besides,
the upgrading of textiles and clothes and the variety increase
of spandex textile materials will further promote the demand of
spandex.