With the deepening of reform and opening up and the development of China's textile industry, the dye industry has achieved rapid development. Due to the growing consumer demand for washable products and high environmental standards, it is expected to stimulate the transformation and upgrading of China's dye industry, especially the research and development and production of high-end dyes will be the focus of the development of the dye industry.

Decline in dye production

In recent years, China's dye production has generally shown a downward trend, and the output has dropped from 992,000 tons in 2017 to 769,000 tons in 2020. The main reason is that in 2018, China entered the intensive landing period of environmental protection policies, with the implementation of a number of environmental protection laws and policies, local governments have carried out centralized rectification of dye manufacturing enterprises in the relevant areas, and many dye production enterprises with substandard environmental protection facilities have been limited or even stopped production, resulting in a certain decline in the overall operating rate and output of the dye manufacturing industry.

It is worth noting that although the production of dyes in China during the "13th Five-Year Plan" period is constantly declining, the quality and efficiency are constantly improving. It is expected that in 2022, China's dye production will further decline to 735,000 tons.

Total output value of dyestuff industry

In recent years, the performance of China's dye industry has been continuously improved. From 2018 to 2020, the total output value of China's dye industry is 68.75 billion yuan, 70.98 billion yuan and 67.05 billion yuan, and the sales revenue is 68.15 billion yuan, 68.83 billion yuan and 60.9 billion yuan, respectively.

Although some domestic dye smes stopped production and limited production in 2018 and 2019 due to environmental protection and safety issues, resulting in a decline in dye production that year, the adjustment of industrial structure and changes in market supply and demand have made the price of dye products increase significantly, and the industry structure has been further optimized. Enterprises with environmental protection and safety technology advantages have room for further development.

In 2020, affected by the new coronavirus epidemic, the total output value and sales revenue of the dye industry have declined. It is expected that the total output value of the dye industry will further increase to 68.15 billion yuan in 2022.

Industry pattern is stable, drought and flood guarantee

Like other industries that are not too sexy, the dye industry has a relatively stable industry pattern. Dyes in China is a highly polluting restricted industry, the approval of new capacity is very difficult, especially in Jiangsu and Zhejiang areas close to the terminal market, it has been expressly stipulated that the approval is no longer issued, expansion can only be in the form of relocation or technical transformation, and concentrated in the leading, the new supply will be very limited.

Then we'll talk about the upstream and downstream of dyes. The upstream of the dye is the intermediate, and the upstream of the intermediate is the petrochemical and coal chemical industry, and the downstream is the textile and garment industry. Looking upstream, the raw materials used in dyes are mostly primary chemicals of petrochemical and coal chemical industries, and their consumption accounts for a very small proportion of the total output of the entire industrial product, so the correlation degree with the petrochemical and coal chemical industry is relatively low. Looking downstream, because the cost of dyes in the textile and garment industry is relatively small, and the scale of downstream printing and dyeing plants is relatively small, dye companies have a strong cost transmission capacity to the downstream, price changes are timely, and accounts receivable are very small. In addition, although dyes are susceptible to the cost of intermediates, companies in the industry have their own intermediate production capacity, so the impact of intermediates is not large.

Therefore, as long as downstream demand is no problem, companies in the industry have a certain resistance to fluctuations in prices and other factors.

Lack of demand is the biggest pain point

However, the dye industry is currently suffering from a lack of demand.

In 2022, affected by the new coronavirus epidemic and the Russia-Ukraine war, printing and dyeing enterprises have reduced demand for dyes, poor domestic demand, limited dye exports, and greater pressure on enterprises. According to the National Bureau of Statistics, in 2022, the printing and dyeing cloth output of enterprises above designated size in China's printing and dyeing industry was 55.622 billion meters, down 7.52% year-on-year, and the retail sales of clothing, shoes and hats, needles and textile commodities were 1.30 trillion yuan, down 6.50% year-on-year. Affected by the whole industry, the national dye production in 2022 showed a certain decline compared with 2021.

The first quarter of 2023 is a little better, but not much better. According to the survey of China Textile Industry Federation, the comprehensive prosperity index of China's textile industry in the first quarter was 55.6%, up 13% and 8.6% from the same period last year and the fourth quarter of 2022. However, at present, the prospects for recovery in the international market are uncertain, global inflation is still high, the risks of the financial system are rising, and the market consumption power and consumer confidence are improving slowly. The complex evolution of the geopolitical situation and the factors of the international trade environment have brought more uncertainties to the in-depth participation of China's textile industry in global production capacity cooperation. Although the domestic macro economy has stabilized and recovered, the basis for continuous improvement of domestic consumption is still unstable, the operating pressure such as high costs and profit compression is still large, and the industry is still far from the dark moment. It can be seen from the continuous decline in the gross profit margin of Zhejiang Longsheng, the industry leader.

There are hidden worries beneath the bright ones

In addition to insufficient consumption, the dye industry is also facing many problems.

Although the national safety and environmental protection supervision of the dye industry is increasingly strict, there is no doubt that the dye and downstream printing and dyeing industry has been an unmitigated high-pollution industry. The disposal of by-product waste salt is still the main problem to be faced by the development of the industry. China's dye industry produces 400,000 tons of waste salt every year, accounting for 20% of the total waste salt in the chemical industry, and the wastewater discharge of the textile printing and dyeing industry accounts for 8% of the national industrial wastewater discharge.

At present, many countries in the world, especially developed countries, have established a "green barrier" mechanism, in the form of laws and regulations to prohibit or restrict the import and use of certain dyes that are harmful to the human body or pollute the environment. For example, the EU REACH regulation, the EU market about 30,000 chemical products and its downstream textile, light industry, pharmaceutical and other products are included in the registration, evaluation and licensing of three management monitoring systems, not included in the management system of products can not be sold in the EU market. The "green barrier" will significantly increase the export cost of textile chemicals and textiles, increase the creation cost of new textile chemicals and new textiles, and then restrict the export and development of China's textile chemicals and textiles.

China's dye industry is also in urgent need of transformation.

The dye industry has experienced supply-side reform and multiple rounds of integration, but it still can't get rid of the situation of "stupid and stupid". As mentioned above, dyes originated in Europe, and later China became the world's first, which is inseparable from the efforts of generations of Chinese printing and dyeing people. However, it is undeniable that the industrial transfer of dyes is also the result of the global division of labor. Over the past 20 years, China has achieved sustained high-speed economic growth, and the pattern of globalization has also experienced tremendous changes, and China is no longer the most cost-advantaged country. The textile and garment industry is also gradually moving from China to regions with lower labor costs, such as Southeast Asia. For China's dye industry, globalization has changed from the main opportunity to the coexistence of opportunities and challenges. In the future, the dye industry should actively transform into a capital-intensive, technology-intensive, and talent intensive high-investment, high-return innovative industry, anchor high-end environmental protection dyes, and enhance brand competitiveness and service level. In this way, is the sustainable development of the dye industry.

Article source: Zhongshang Industrial Research Institute, Starry Sky Wealth