Summary of Key Points
The downstream textile and apparel industry has not yet recovered, but the prices of upstream dyes have skyrocketed first. The main reason is the soaring prices of the “raw materials” (intermediates) used in dye production. For example, the price of H-acid has increased from 45,000 yuan per ton to 120,000 yuan per ton, a rise of nearly 300%. This price increase has led to massive profits for leading companies that can produce these intermediates themselves (such as Runtu Co., Ltd. and Jihua Group), with some profits increasing by up to 13 times. However, smaller dye manufacturers and traditional printing and dyeing factories have been squeezed, with their profits almost completely eroded by the higher costs from upstream suppliers. Behind this price surge are issues such as a shortage of intermediate supply (due to stricter environmental regulations that have shut down smaller plants, high temperatures in India reducing production, and disruptions in sulfur supplies from the Middle East). How long the price increase will continue depends on the situation in the Middle East, whether the downstream “Golden September and Silver October” sales season meets expectations, and whether supply increases.
Detailed Analysis
1. The Hidden Driver of Dye Price Increases: Soaring Intermediate Prices
Dyes don’t appear out of thin air; they require intermediates to be produced. Just as flour is needed to make bread, H-acid and other intermediates are essential for dye production. This year, the prices of these intermediates have risen dramatically:
- H-acid: From 45,000 yuan per ton to 120,000 yuan per ton, with a 30% increase in just one day on July 28th;
- Reductants: From 25,000 yuan per ton at the end of 2025, they have soared to 70,000–100,000 yuan per ton, a nearly threefold increase.
These intermediates account for 20–30% of the cost of dyes, so when their prices rise, dye prices inevitably follow.
Why are the intermediates so expensive? Mainly due to insufficient supply:
- Strict Domestic Regulations: The sulfonation and nitration processes used in intermediate production are highly polluting and dangerous. Since March this year, environmental and safety inspections have been intensified, forcing smaller plants with annual output below 100 million yuan to close. As a result, supply has concentrated in the hands of leading companies, and new capacity will take several years to be established.
- Reduced Production in India: India is a major global dye producer, but extreme heat recently has reduced its production capacity, further tightening global supply.
- Middle East Situation: Iran is a major sulfur supplier (a key ingredient for intermediates), and political instability there has affected sulfur production and transportation, leading to higher costs that are passed on to the downstream market.
2. A Tale of Two Worlds: Some Profit, Many Suffer
This price increase has a stark impact on different companies:
- Leading Companies Profiting: Runtu Co., Ltd. expects its profits to rise by 254%–334% in the first half of the year, while Jihua Group’s profits have increased by 13 times. These companies can produce intermediates internally, so they don’t need to buy them at high prices and can pass on the cost increases, effectively saving money and making extra profits.
- Smaller Dye Manufacturers Struggling: Companies without their own intermediate production capacity try to pass on the higher costs to downstream printing and dyeing factories, but these factories are already under pressure and may have to cut profits or reject unprofitable orders, fearing that the entire supply chain could be affected in the long run.
- Traditional Printing and Dyeing Factories in the Worst Position: With excess capacity and a stagnant downstream clothing market, they cannot pass on the cost increases and are forced to bear the higher dye prices, resulting in reduced profits.
3. Differentiated Impacts on the Downstream Industry
The impact of dye price increases is not uniform:
- Mid-to-High End Fabric Manufacturers: Dyes account for a small portion of their total costs (especially for those focusing on technological advancements in fabric production), so the impact is limited; some can even offset the increase through higher product prices.
- Traditional Fabric/Apparel Manufacturers: Although dyes are a minor cost, they can often switch to alternative products if certain dye prices rise too much.
- Traditional Printing and Dyeing Factories: They are in the most difficult position, as they use large amounts of dyes daily (for example, Zhang Jianmu’s factory uses 2 tons of reactive dyes per day, costing an additional 20,000 yuan) and cannot pass on the increased costs to their customers.
4. How Long Will the Price Increase Last? It Depends on These Factors
Industry insiders predict that the price increase may continue until September or October, but three key factors will determine its duration:
- Middle East Situation: If conflicts ease and sulfur supply returns to normal, intermediate costs will decrease.
- Downstream Demand During the “Golden September and Silver October” Season: If sales are strong during this period, printing and dyeing factories will be willing to pay higher prices, sustaining the increase. Otherwise, if demand declines, leading companies may have to lower prices.
- Supply Increase: If leading companies expand their intermediate production capacity or smaller plants find compliant ways to resume production, supply will increase, and prices will likely fall.
5. Industry Trends: Elimination of Smaller Plants and the Need for Transformation
This price surge is a sign of industry consolidation:
- Increasing Concentration: Environmental and safety regulations will continue to eliminate smaller plants, leading to more market power in the hands of leading companies.
- Transformation as the Way Forward: Companies like Zhang Jianmu are investing in digital and intelligent transformation of their printing and dyeing processes. Although it may require capital upfront, this can improve efficiency and reduce costs, helping them withstand future price fluctuations.
- Export Challenges: Some suggest that China could replace Indian dyes due to lower prices and fewer environmental regulations, but Indian dyes are still 30% cheaper, making it difficult for Chinese companies to compete in the short term. Therefore, transformation is essential.
In summary, this dye price increase is caused by supply issues, with downstream demand failing to keep up. Smaller manufacturers and printing and dyeing factories are the most affected. In the future, companies will either need to wait for supply to recover or for downstream demand to pick up; otherwise, the price increase is unlikely to continue. For businesses, becoming leaders with intermediate production capacity or rapidly transforming to enhance competitiveness is crucial, or they may face extinction before the industry emerges from this challenge.