Reasons for continued price increase in the dye industry

Recently, the leading dye companies have raised their prices again. The price of disperse dyes has risen by about 2,000 yuan/ton, and the price increase rate has reached 9%. The relevant person in charge of Zhejiang Longsheng stated that the company’s current price for disperse dyes is around 25,000 yuan to 26,000 yuan per ton, which is about 2,000 yuan per ton higher than the previous 23,000 yuan to 24,000 yuan per ton. At the beginning of 2013, the price of disperse dyes was 16,500 yuan/ton. The company’s stakeholders also confirmed the fact that the prices of disperse dyes have risen. Let's take a look at the price increase in the dye industry.

Why are downstream dye prices continuing to rise?

According to industry insiders, this is mainly because about 90% of disperse dye production is concentrated in the Zhejiang region, Zhejiang Longsheng, Bauxite shares, and Hangzhou Jihua account for 74% of the industry's total production capacity; reactive dye production capacity is mainly concentrated in Hubei. Zhejiang Longsheng, Taixing Jinyun (Chenhua Shares), and Lutuo Stock accounted for 85% of the total production capacity. This has led to the dye industry has now formed a duopoly pattern. Zhejiang Longsheng and Bauxite shares accounted for 35% and 30% of the disperse dye market respectively, ranking the industry's top pick and second place. In the past two years, the price of dyestuffs continued to fall because of the pricing strategy and the competition between them. As a result, the prices of disperse dyes and reactive dyes have fallen sharply. Disperse dyes dropped to around 16,000 yuan per ton, setting a new low in recent years. As the price of dyestuffs continues to fall, the profitability of the industry continues to decline. As a result, small dye manufacturers have little or no incentive to expand production, and the concentration of the industry gradually increases.

At the beginning of this year, industry oligopolists moved from competition to cooperation. The lawsuit settlement of Zhejiang Longsheng and Lantuo marks that the competition in the dye industry has shifted from competition to oligopoly, which indicates that the dye industry moves from competition to a cooperative game stage. Leading companies continue to use “patents” as a sword to restrict small-scale dye enterprises and expand. Its own profitability, and environmental protection and patent constraints on the industry significantly exceeded expectations, through the "patent sword" to achieve effective integration of the industry's major disperse dye manufacturers and deterrence of potential entrants. In addition, the dye industry is heavily polluted. Due to frequent environmental pollution incidents in the country, many small factories have been forced to shut down due to factors such as environmental protection policies, which further restricts the supply of the industry.

Environmental protection requirements are increasingly pushing hard on high costs, which is also an important factor that causes the price of dyes to rise. According to report, during the “12th Five-Year Plan” period, the state has put forward more stringent requirements for the dye industry in terms of environmental protection. The environmental protection of textiles and textile production is highly valued. Non-toxic and non-polluting “green fabrics” have become a The mainstream of production and consumption. In addition, dye products will be more widely used in aerospace, transportation, sports, health and defense, and other fields, which also puts higher requirements on product technology and environmental protection.

At the same time, in November last year when Zhejiang Longsheng and Bauxite stocks slammed into the court because of a patent lawsuit, dealers started to destock because they expected the price of dyes to fall and the financial pressures at the end of the year were large. This led to distributors early this year. Relatively few hands on hand.

Will dye prices continue to rise?

The industry has a polarization perspective and believes that the rise will be concentrated in the dye industry. Their point of view is: Immediately usher in the peak season of the industry from August to November, the downstream demand will increase, and the profitability and cost transferability of dyeing and printing will be strong. Reserve potential price increase space.

Dyes and upstream intermediates are becoming more and more environmentally friendly. As dye production companies are high-emissions emitters, coupled with problems with more groundwater since 2013, it is expected that dye companies will face more stringent wastewater discharge standards. Some manufacturers of dye intermediates in small and medium-sized companies will be phased out due to environmental issues. Therefore, the cost of environmental protection for dye production enterprises will increase in the future. The rising cost of environmental protection will drive up the price of intermediates and gradually increase the actual cost of dyes, which will increase the price of dyes.

In addition, Longsheng's acquisition of DyStar, inherited all the intellectual property patents of the world's largest dye factory, the competition in the entire industry is actually more cruel, and small factories have no conditions to deal with intellectual property rights. Therefore, there is still room for significant improvement in the price of dyes during the peak season.

However, there are also industry insiders who anticipate the lack of power support for the future price increase of dye prices. The reason is that the current boom in textile and apparel terminals is not high, and the market is therefore doubtful whether the profitability of dyes will continue to increase. The demand for downstream terminal equipment is picking up. Printing and dyeing companies' profits have been squeezed.

At present, downstream terminal customers have poor demand, resulting in fewer orders for some printing and dyeing companies. At the same time, due to stringent environmental protection requirements, the cost pressures on dyeing and printing enterprises have increased, and the cumulative increase in the price of dyestuffs has been relatively large. Some printing and dyeing companies have expressed that it is difficult to accept. At present, the profit of small and medium-sized dyeing factories is under pressure, and many companies have already given up orders for printing and dyeing and stopped maintenance.

The patent litigation in the dye industry has a limited effect on the industry supply. With the strengthening of awareness of intellectual property protection, production companies will pay more and more attention to the protection of intellectual property rights, including the application for various patents, and for patent litigation of leading companies, other companies will respond better.

In addition, the price increase of disperse dyes is much higher than that of reactive dyes, mainly because the top three companies of disperse dyes occupy most of the market share of the industry. The industry concentration is much higher than that of reactive dyes, and reactive dyes are also constrained by India. Due to the lower demand of downstream terminals and the decline in the enthusiasm of dealers to take delivery of goods, it is expected that there will be no fundamental support for the continued rise in the prices of disperse dyes.