Prices for dye intermediates in China have nearly quadrupled due to stricter safety and environmental regulations that have increased entry barriers for manufacturers. This has led to squeezed profit margins for companies operating in the midstream and downstream sectors, such as printing and textiles.
A senior manager at a printing and dyeing company in Shaoxing, Zhejiang province, reported that the cost of H acid (8-amino-1-naphthol-2,3-disulfonic acid) jumped from around CNY45,000 (USD6,670) to nearly CNY120,000 (USD17,790) per ton. This spike significantly increased the raw material costs for the company’s primary dyes.
On July 28, H acid, a vital component for reactive dyes, saw its price increase by over 30 percent, and prices have continued upward into August. Additionally, prices for key intermediates used in dispersible dyes—such as reducing agents 3-amino-4-methoxyacetanilide, m-Phenylenediamine, and hexachloro/hexabromo compounds—have surged nearly 300 percent since the end of last year.
For midstream and downstream dye mills, passing these cost increases to clients remains difficult, as their operations have been under financial strain for some time. A medium-sized dye manufacturer in Jiangsu province indicated that to retain customers, they are forced to cut short-term profits. “Without profit, it might be better to shut down,” he said.
Printing and dyeing firms are most affected by these raw material price hikes due to the industry’s existing overcapacity issues. With downstream fabric and apparel suppliers also feeling the pressure, raising prices across the supply chain isn’t feasible, according to a fabric producer in Shaoxing. As a result, these companies have little choice but to accept higher costs passively.
For downstream producers such as fabric and clothing manufacturers, dyes represent a relatively small part of their total costs. Moreover, if a specific dye’s price becomes prohibitively high, they can opt not to use it altogether.
A fabric company in Wujiang, Jiangsu province, that has lately been focusing on mid-to-high-end functional fabrics, believes it can better withstand upstream cost increases, thanks to its premium product positioning.
The surge in dye intermediate prices is largely driven by stricter safety and environmental policies, which have heightened entry barriers and accelerated the closure of outdated, polluting production facilities, says a research report from Guosen Securities. Many processes for manufacturing dye intermediates are considered hazardous and pollution-intensive. As environmental and safety standards tighten, small firms with annual outputs of less than CNY100 million (USD14.8 million) have been shutting down since March.
Meanwhile, new compliant production capacities are taking time to come online, creating a supply gap during this transition period.
Dye prices are expected to remain elevated for the foreseeable future, especially if the apparel industry stays busy with orders this fall. However, if downstream demand weakens significantly, there’s a chance that dye prices might begin to decline.