Gu Sujing, SCI

China’s dye industry faced an oversupply situation in 2021, given public health incidents and stricter environmental protection policies in recent years. 

Relatively Surplus Supply

Faced with the upgrade of environmental protection technology and public health incidents in the past three years, some small-sized dye enterprises withdrew from the market and domestic dye output dropped as a result. The recovery of global economy in 2021 pushed up consumption from the end-use textiles industry and reversed the negative year-on-year growth in dye production. China’s dye output is expected to reach 805.3 kt in 2021, up by 3.24% year on year. Table 1 shows dye supply in 2017-2021. On the demand side, domestic dye demand is expected at 750 kt in 2021, up by 2% year on year. Currently, domestic dye supply and demand are both on the rise and the increase in demand is falling behind that in supply. Meanwhile, a few grades rely on imports and total inventories are high. Hence, the domestic dye market is in an oversupply situations.  

Supply-demand situation was one of the major factors affecting domestic dye prices in 2021. Industrial products prices in China showed a reversed “W” trend, bottoming out in February and then fluctuating downwards for nearly half a year before rebounding in October due to force majeure. The rally was not sustainable and prices fell back again in November. 

Prices and Supply both Rise

On the supply side, the capacity utilization rate was 65.34% in 2021, up by 6.82 percentage points year on year. This was because of the restart at some large dye plants in the first half of 2021. Two times price rallies bolstered downstream buying sentiment, which also boosted the capacity utilization rate. 

Domestic dye inventories totalled 232.2 kt in 2021, up by 27.23% year on year, reflecting that supply outweighed demand. The inventories were equivalent to three months’ consumption, higher than the same period of previous years and mean that the normal stocking cycle of the dye industry is at the upper limit of two to three months.

In 2021, domestic dye capacity mainly included disperse dyes and reactive dyes, accounting for around 40% and 30% of the total respectively. The supply pattern is currently the same. Disperse capacities of Zhejiang Longsheng, Zhejiang Runtu and Jihua Group occupied 60% of the domestic total, while Jiangsu Jinji, Hubei Huali, Zhejiang Longsheng, Zhejiang Runtu and Jihua Group took up 60% of domestic reactive dye capacity. China’s disperse and reactive dye capacity are mainly concentrated in Zhejiang and Jiangsu. Figure 1 shows the regional distribution in 2021. 

Figure 1 Regional Distribution of China’s Disperse and Reactive Dye Capacity in 2021

With world dye production centre shifting to China, China’s import reliance rate of dyes is decreasing. Most products can be made domestically amid fast development of China’s dye industry. According to customs statistics, China imported 4.11 kt of disperse dyes by October 2021, down by 4.22% year on year and 13.59 kt of reactive dyes, up by 38.28% year on year. Figure 2 shows China’s import data of disperse dyes in 2020-2021. 

             Figure 2 China’s Import Data of Disperse Dyes in 2020-2021 Demand                          Increases  Stably

Dye downstream consumption structure was largely stable in 2021 as compared to 2020, generally divided into two main categories including textiles printing and dyeing and other sectors, as shown in Figure 3. Textile printing and dyeing is the most direct and largest downstream user and thus, its operation status directly reflects dye demand. Statistics showed that textile printing and dyeing accounted for 93% of domestic dye consumption, and the remaining 7% was contributed by leather dyeing, paper dyeing, food additives and plastic filling.  

Figure 3 China’s Downstream Consumption Structure of Dye Products

The distribution features of printing and dyeing plants are the same with those of the dye industry. These plants are mainly located in Jiangsu and Zhejiang, and the latter took up over 50%, as shown in Figure 4. The government in Zhejiang issued a decree requiring printing and dyeing plants to relocate to Binhai industrial zone due to heavy pollution. Statistics showed that the textile printing and dyeing output in Shaoxing Heqiao accounts for one third of the domestic total and a half of Zhejiang. As the relocation work has not been completed yet, Shaoxing, Hangzhou and Jiaxing currently occupy the largest proportion of printing and dyeing output. Jiangsu, Wujiang, Changshu, Taicang and Zhangjiagang have a larger proportion of printing and dyeing output.

Figure 4 Ratio of Printing and Dyeing Cloth Output of China’s Major Provinces

Figure 5 shows China’s printing and dyeing cloth output growth in 2017-2021. Environmental checks in 2018 affected major producing regions including Zhejiang. Some printing and dyeing enterprises were required to shut for rectification, which reduced domestic output and supply. The Covid-19 outbreak in 2020 curbed domestic and overseas demand of the clothing industry and weighed down printing and dyeing production. In 2021, the effective control of the virus and the global economic recovery boosted the textile printing and dyeing industry. Statistics showed that domestic printing and dyeing output was expected at 54.774 billion metres, up by 15 percentage points year on year. 

Figure 5 China’s Printing and Dyeing Cloth Output Growth in 2017-2021

The overall operating rate of China’s printing and dyeing industry was higher in 2021 than the same period of 2020, as shown in Figure 6. This is because increased demand pushed up printing and dyeing output. In addition, low capacity base after backward capacities were phased out contributed to the rise in operating rate. 

Figure 6 Operating Rate of Printing and Dyeing Industry in Jiangsu and Zhejiang      during 2020-2021

The operation status of the printing and dyeing industry in the first half of 2021 was largely stable as compared to the same period of 2020. The trends of operating rate kept in line with the industry’s peak and off-season (March-April is the peak season in the first half year). Brisk buying from textile and clothing industries both at home and abroad boosted demand and dyeing fees. This raised the overall operating rate of the printing and dyeing industry.

Dye exports surged year on year in 2021 on domestic and overseas economic recovery. Figure 7 shows China’s disperse dye exports in 2020-2021. According to customs statistics, China exported 83.03 kt of disperse dyes by October 2021, up by 21.10% month on month and by 35.21% year on year, while reactive exports totalled 34.43 kt, up by 41.77% year on year. Major export trade partners in 2021 concentrated in Asia and Indonesia. Taiwan and South Korea remained the major export destinations. 

Figure 7 China’s Disperse Dye Exports in 2020-2021Supply-Demand Pattern to          Remain Relatively Stable in 2022

     Looking into China’s dye market in 2022, the supply-demand pattern is expected to be largely stable. Supply may increase slightly amid high inventories, while demand increase is likely to be relatively slow, which may weaken the upward steam of dye prices to some extent. The capacity concentration level will continue to rise against the backdrop of environmental checks and the phase-out of backward capacities. This will enhance leading enterprises’ negotiating power. To sum up, average domestic dye prices in 2022 are expected to inch up by around 5%. Take reactive dye WNN 200% for instance, its prices may fluctuate in the range of RMB24-28/kilogram in cash. Disperse dyes prices are heavily impacted by sales strategies. Its price rise can be up to 20% and the fluctuation range is expected at RMB22-30/kilogram in cash.