Overcapacity is the current pain point of the dye industry

Recently, the Secretariat of China Dyestuff Industry Association has paid close attention to the changes in the national epidemic situation in Shanghai and other regions. In early and mid-May, the staff of the Secretariat of China Dyeing Association contacted nearly 70 member companies through various forms of communication such as phone calls and WeChat to fully understand the production and operation conditions of member companies, and did their best to provide member companies with information and services as best as possible. Go to the association secretariat for care and condolences and provide support as much as possible.

The COVID-19 epidemic has recently broken out in many places in my country, especially in Shanghai and surrounding areas (including Jiangsu, Zhejiang, etc.) where my country’s dye, organic pigment and textile auxiliaries industries are relatively concentrated. (region), enterprise production and employees’ lives have been affected to varying degrees. The Beijing area has been severely affected by the COVID-19 epidemic recently, and the China Dyestuff Industry Association feels the same way. In this more general contact with member companies, we deeply understand the difficulties that the new coronavirus epidemic has brought to member companies.

With the outbreak of the epidemic and the continuation of the Russia-Ukraine war, the global industrial chain and supply chain have encountered unprecedented impacts. Based on the analysis of information fed back by member companies, the reasons that have a greater impact on the production and operation of the dye industry can be summarized as follows:

1. Affected by the COVID-19 epidemic and the Russia-Ukraine war, domestic and foreign demand has been weak, and dye production and sales have declined seriously. The domestic printing and dyeing industry was affected by the epidemic and the demand for dyes was reduced. The Russia-Ukraine war had a negative impact on the dyeexports, especially to Europe and the United States. Exports have a greater impact.

2. Affected by the COVID-19 epidemic, the prices of some upstream raw materials have increased, and downstream demand has declined, resulting in greater downward pressure on dye prices. Dyestuff prices have been severely squeezed, profit margins have further shrunk, and some companies are facing the possibility of losses.

3. Affected by the COVID-19 epidemic, various places have strengthened personnel management and control, and personnel travel and resumption of work have been restricted, which has affected the development of production organization and business activities. Although some companies have begun to resume production and work, the costs have increased (protection, centralized accommodation in the region, cross-regional restrictions, etc., making practical operations difficult).

4. Affected by the new coronavirus epidemic, logistics is restricted. Domestic logistics speed has slowed down and freight has increased. The transportation of raw materials affects production organization, and the transportation of products affects sales. In export logistics, most orders need to be transferred from Shanghai Port to other ports. In addition to domestic transportation difficulties, the port’s insufficient capacity and sharp rise in freight have brought great difficulties to enterprises.

In fact, the above-mentioned reasons are only superficial reasons for the difficulties in production and operation of the dye industry due to the impact of the new coronavirus epidemic and the Russia-Ukraine war. The underlying reasons are the industry’s overcapacity, vicious competition, and mutual price reductions.

In recent years, the layout of my country’s dye and pigment industry has undergone major changes. Some companies have closed down and merged, and some companies are expanding production capacity. According to incomplete statistics, the capacity of organic pigments built, under construction and planned exceeds more than 200,000 tons, and the capacity of dyes also exceeds hundreds of thousands of tons. Some bulk intermediates and printing and dyeing auxiliaries are also expanding their production capacity. Most products in the dye and pigment industry are currently experiencing oversupply. If too much new production capacity is put into production, the industry will face an oversupply situation.

The newly planned production capacity is too large, competition among enterprises will further intensify, and price competition will become increasingly serious. The global epidemic that has raged in the past two years has brought an unprecedented blow to global economic development. During this period, import and export trade was severely hindered, and the prices of chemical bulk raw materials, intermediates, etc. continued to rise, which has severely affected Chinese dyes and pigments, which are caught between the terminal market and the raw material market. The industry has had a huge impact. Especially since 2021, the prices of upstream raw materials and energy have risen rapidly. Although the overall output and main business income of the dye and pigment industry are in positive growth, the price of dye and pigment has been squeezed by both the industry and the downstream industry, and the total profit growth rate has begun. There was a cliff-like decline, and the total profit for the whole year showed negative growth, or even a serious decline. Some companies in the dye and pigment industry have already suffered losses. Judging from the performance of major listed dye companies in the first quarter of 2022, the profits of some listed dye companies have suffered serious declines or even losses, and the entire dye industry has shown signs of weakness. This is a very rare phenomenon in the dye industry in recent years.

The serious industry overcapacity problem will not get better in the long term even if the COVID-19 epidemic and the Russia-Ukraine war end. The fatigue of the entire dye industry has been reflected in the prosperity of the dye industry. Going by current trends, the dye industry is still in a freeze. Whether the dye industry will rebound in the long term depends not only on the prosperity of downstream printing and dyeing industries, but also on the adjustment of the industrial structure of the dye industry. The situation in the dye industry will be quite severe in 2022.

We hereby advocate that the entire industry adjusts the industrial structure, reasonably limits production capacity, orderly competition, fair pricing, and avoid maliciously lowering prices. Industry enterprises must correctly analyze the current national industrial policy orientation and macroeconomic situation, keep pace with the times and follow the trend, put stability first, seek progress while maintaining stability, make progress while improving, improve quality while improving, and increase efficiency while improving quality. All enterprises are requested to pay close attention to production and operation conditions, and adjust production capacity in a timely manner according to fluctuations in the upstream raw material market.and business strategies to ensure that the production and sales prices of dyes and pigments are within a reasonable range and stabilize the market. At the same time, it is recommended that all enterprises strengthen management, work hard on internal skills, do their best to reduce material and energy consumption, reduce “three wastes” emissions, improve productquality, develop specialty products, and stagger competition. , Reduce the harm caused by homogeneous competition.

We sincerely hope that companies affected by the new coronavirus epidemic will actively carry out anti-epidemic work in accordance with the requirements of the local government. Here, the Association Secretariat would like to extend cordial condolences to the dye industry companies and their employees who are sticking to and fighting on the front line of the epidemic! We firmly believe that “there is no spring that will not come” and “no epidemic that will not pass”! As long as all colleagues in the industry work together to fight the epidemic and overcome the difficulties, normal production and life will surely return, and the colorful spring of our industry will surely reappear!

AAA

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