Summary of Conference Call Notes Industry Overview - The viscose filament market is currently balanced in supply and demand, with stable prices benefiting from increased demand driven by the new national style. It is expected that there will be an annual demand increase of 10,000 to 20,000 tons over the next 3-5 years, allowing the industry to maintain high operational levels [2][3] - The spandex industry is nearing the end of market clearing, with a year-on-year sales growth of 17.8% in the first three quarters of 2025. Prices are stable, and gross margins are at breakeven [2][4] Key Points on Spandex Industry - New spandex capacity additions are close to completion, with very few new capacities expected in 2026 and almost none in 2027. The industry is cautious about new supply [2][6] - Current spandex prices are around 23,000 RMB per ton, down from 24,000-25,000 RMB earlier in the year. Some companies are facing significant operational pressures, such as Xiaoxin Chemical, which has a high debt ratio of 175% [2][7] - The average industry operating rate is between 70% and 80%, with a clear differentiation between leading and trailing companies. Leading companies maintain high operating rates, while trailing companies face greater operational pressures [2][9][10] - The growth in spandex demand is primarily driven by increased penetration in the textile industry, which currently stands at only 1.7%. There is significant room for growth, with a long-term expectation of 8% annual demand growth [2][12] Company Performance - The company reported an 18% year-on-year sales growth, outperforming third-party statistics, as customers prefer products from leading companies. However, gross margins are nearly flat, and net profit may incur a loss of around 500 RMB [2][13][15] - The company is currently operating at full capacity, similar to Huafeng, and is responding to market demand with stable pricing strategies. However, rising costs due to the withdrawal of government subsidies for utilities are a concern [2][11] Future Plans and Projects - The company is in the early stages of the mushroom grass pulp project, with an expected increase in planting area by 20,000 to 30,000 mu annually over the next 3-5 years, which will help reduce raw material costs [2][5][21] - The company has paused a 30,000-ton capacity expansion due to strict air quality controls but plans to build new capacity in Xinjiang as a contingency [2][16] - The company’s inventory level is approximately 25 days, which is lower than the industry average of 35 days, indicating strong global demand growth [2][23] - The strategic focus for 2026 will be on mushroom grass planting, with cautious expansion in spandex production contingent on clear market signals [2][24] Additional Insights - The viscose filament market is expected to remain stable in terms of price and volume in 2026, with no significant fluctuations anticipated [2][17] - The impact of US-China trade relations on viscose filament exports is limited, as the market has already begun replenishing stock since 2024 [2][18][19] - The company is collaborating with brands like Jie Rou, Hong Dou, and Qi Pi Lang for the mushroom grass project, although expansion is currently limited by agricultural planting area [2][20][22]