Overcapacity is the current pain point of the dye industry
The recent outbreak of the new crown epidemic in China, especially in Shanghai and surrounding areas (including Jiangsu and Zhejiang), where China's dyestuff, organic pigment and textile auxiliary industries are concentrated, has affected the production of enterprises and the lives of employees to varying degrees. The recent outbreak of the epidemic in Beijing has had a serious impact on the global industrial chain and supply chain, as the outbreak and the war between Russia and Ukraine continue. From the feedback of member companies, the reasons for the greater impact on the production and operation of the dye industry are summarized in the following four points.
First, affected by the new crown epidemic and the Russia-Ukraine war, domestic and foreign demand was weak, and the production and sales of dyestuff dropped seriously. The domestic printing and dyeing industry was affected by the epidemic, and the demand for dyestuff decreased. The war between Russia and Ukraine had a greater impact on dyestuff exports, especially exports to Europe and the United States.
Second, affected by the new crown epidemic, some of the upstream raw material prices rose, downstream demand will decline, resulting in more downward pressure on dyestuff prices, dyestuff prices are seriously squeezed, profit margins further narrowed, some enterprises face the possibility of losses.
Third, the impact of the new crown epidemic, around the strengthening of personnel control, personnel travel, return to work restrictions, affecting the production organization and business activities. At present, although some enterprises have started to resume production and work, the cost has increased (protection, centralized accommodation in the region, cross-regional restrictions, etc., making the practical operation level difficult).
Fourth, affected by the new crown epidemic, logistics is restricted. Domestic logistics slowed down, freight costs rose, raw material transportation affects production organization, product transportation affects sales. Export logistics, most of the orders need to be transferred from Shanghai port to other ports. In addition to the domestic transportation dilemma, the lack of capacity of the port and the significant increase in freight costs have caused great difficulties to the enterprises.
In fact, the above-mentioned reasons are only the apparent reasons for the difficult production and operation situation in the dye industry caused by the new crown epidemic and the Russian-Ukrainian war. The deep-seated reasons are the industry's overcapacity, vicious competition and mutual price pressures.
In recent years, the layout of China's dyeing and pigment industry has undergone major changes, with some enterprises shutting down and transferring, and some expanding their production capacity. According to incomplete statistics, organic pigments have been built, under construction and proposed capacity of more than 200,000 tons, dyestuffs also have hundreds of thousands of tons, some bulk intermediates and printing and dyeing additives are also expanding capacity. Most of the products of dyeing and pigment industry have been showing the situation of oversupply, if too much new capacity is put into production, the industry is facing the situation of oversupply.
If the new production capacity is too large, the competition among enterprises will be further intensified and the price competition will become more and more serious. The global epidemic in the past two years has brought an unprecedented blow to the global economic development, during which the import and export trade was seriously hampered and the prices of chemical bulk raw materials and intermediates continued to rise high, bringing a huge impact to the Chinese dyeing pigment industry which is in the middle of the terminal market and raw material market. Especially since 2021, the prices of upstream raw materials and energy have been rising rapidly, although the overall output and main business income of the whole dyeing pigment industry are in positive growth, the price of dyeing pigment is being squeezed by both the industry and the downstream industry, and the growth rate of total profit has started to decline precipitously, and the total profit of the whole year is negative growth, or even a serious decline. Some enterprises in the dyeing pigment industry have already experienced losses. From the results of major dyestuff listed companies in the first quarter of 2022, some of the dyestuff listed companies have seen a serious drop in profits or even losses, and the entire dyestuff industry has seen weakness, which has been an extremely rare phenomenon in the dyestuff industry over the years.
The serious industry overcapacity problem will not improve in the longer term, even if the new crown epidemic and the Russian-Ukrainian war are over. The weakness of the entire dye industry has been reflected in the boom of the dye industry. According to the current trend, the dye industry is still in a freeze. In the long term, whether the dyestuff industry will rebound and recover depends not only on the prosperity of the downstream printing and dyeing industry, but also on the adjustment of the industry structure. 2022 will be a tough year for the industry.
The industry as a whole needs to adjust its industrial structure in a timely manner, limit production capacity in a reasonable manner, compete in an orderly manner, set fair prices and avoid malicious price depression. Industry enterprises should correctly analyze the current national industrial policy orientation and macroeconomic situation, keep pace with the times, follow the trend, keep the word steady, seek progress, improve the quality, and increase efficiency in the quality. Please pay close attention to the production and operation of each enterprise, adjust the production capacity and management strategy according to the fluctuation of the upstream raw material market, ensure the production and sales price of dyeing pigments within a reasonable range, and stabilize the market. At the same time, we suggest that each enterprise should strengthen management, practice internal strength, do their best to reduce material consumption and energy consumption, reduce the emission of "three wastes", improve product quality, develop special products, and compete in a wrong position to reduce the harm caused by homogeneous competition.
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 join hands to fight the epidemic and overcome the difficulties, we will definitely return to normal production and life, and will definitely reproduce the spring of our industry!
(Content from China Dyestuff Industry Association)