On February 9, the dye sector in the A-share market experienced a strong rally, surging significantly once again and becoming a highlight of the day's market performance. By the close, four stocks—Runtu Co., Ltd. (SZ002440), Yabang Co., Ltd. (SH603188), Fluolite Co., Ltd. (SH605566), and Jihua Group (SH603980)—hit the daily limit-up, while industry leader Zhejiang Longsheng (SH600352) saw its stock price surge by 9.50%, reflecting overall active performance in the sector. Behind this sector-wide surge is the recent wave of price hikes initiated by dye companies, directly triggered by the sharp increase in the prices of upstream core raw materials.

It is understood that the price hike trend among domestic dye companies began in late January and accelerated noticeably in February, with price adjustments by leading industry players continuing to draw market attention. On February 8, industry leader Zhejiang Longsheng took the lead by issuing a price adjustment notice, clearly stating that starting from that day, prices for all dye varieties, including Disperse Black, would be uniformly raised by RMB 2,000 per ton. The company attributed this price adjustment directly to the increase in raw material costs, such as the price of intermediate reductants, leading to corresponding adjustments in dye product prices. Notably, the recent cumulative price increase for the company's main product, Disperse Black, has reached RMB 5,000 per ton, showing an accelerated trend in the short term.

On February 5, during an institutional research meeting, Zhejiang Longsheng disclosed that the recent cumulative price increase for Disperse Black was RMB 3,000 per ton. However, by February 9, the cumulative increase for this product had risen to RMB 5,000 per ton, meaning an additional RMB 2,000 per ton increase within just four days. In addition to disperse dyes, reactive dyes have also seen varying degrees of price increases. For instance, the price of Reactive Brilliant Blue has risen from RMB 150,000 per ton to RMB 180,000 per ton, marking a relatively significant increase, while price adjustments for major varieties of reactive dyes have been relatively moderate overall.

Following Zhejiang Longsheng's lead, other dye companies have also adjusted their prices accordingly. On February 9, media reports indicated that Fluolite Co., Ltd.'s sales department had issued a price increase notice to customers, announcing adjustments to disperse dye prices effective that day. Among the adjustments, nine products, including Disperse Black ECT (300%), were raised by RMB 2,000 per ton, while Navy Blue HW-SR was raised by RMB 3,000 per ton. The price increases for the ten affected products are estimated to be around 10%.

Runtu Co., Ltd., which adopted a price-following strategy, has also raised product prices multiple times in the short term. During a research meeting on January 28, the company stated that the price of Disperse Black had recently increased by approximately RMB 1,000 per ton. By February 9, the company further disclosed that the cumulative price increase for this product had reached RMB 5,000 per ton, clearly aligning with the industry's price hike trend.

The core driver behind this collective price increase in the dye industry is the sharp rise in the price of the key upstream intermediate, reductants. Zhejiang Longsheng explicitly stated that the current dye price hike is primarily due to the increase in raw material costs, particularly the price increases for important intermediates such as reductants and hexachlorobenzene. According to industry insiders, the market price of reductants surged from RMB 20,000 per ton on January 20 to RMB 50,000 per ton on February 5. By February 9, the market price had further climbed to RMB 70,000 per ton, reflecting a staggering increase in a short period.

In an interview with reporters, an industry insider noted that the dye chemical industry is a fully competitive cyclical sector. As an essential product for downstream industries such as apparel and home textiles, dye prices and gross margins have previously remained at low levels. The current price increase is a normal transmission of cost pressures, and the pricing of reductants follows market trends rather than being controlled by any single company.

From the perspective of reductant production capacity, there are currently only three major domestic producers: Zhejiang Longsheng, Runtu Co., Ltd., and Ningxia Zhongsheng New Technology Co., Ltd. Among them, Zhejiang Longsheng has an annual reductant production capacity of approximately 20,000 tons, while Runtu Co., Ltd. has an annual capacity of about 8,000 tons, with production volumes adjusted according to market conditions. Most of Runtu's reductant output is used in-house to support its disperse dye production.

The continuous rise in reductant prices may have a profound impact on the structure of the dye industry. Analysis indicates that reductants account for 20% to 30% of dye production costs, and their rigid price increase will be directly transmitted to downstream dye products. For small and medium-sized dye manufacturers without integrated supply chains, this hard cost is difficult to absorb. If they cannot pass on the cost to downstream customers, their profit margins will be severely squeezed. Therefore, this price transmission is expected to proceed smoothly and sustain for a certain period.

The research report further predicts that if reductant prices continue to rise, the cost pressure faced by small and medium-sized dye manufacturers will be significantly higher than that of leading companies with well-established industrial chain layouts. This may force smaller players to reduce production or exit the market, accelerating industry consolidation and further strengthening the pricing power of leading companies.

At the same time, the "Guiding Opinions on Carrying Out Zero-Carbon Factory Construction Work" jointly issued by the Ministry of Industry and Information Technology and four other departments stipulates that zero-carbon factory demonstration projects will be selected starting in 2026. Higher environmental requirements and green compliance costs will further compress the survival space for small and medium-sized enterprises, while the advantages of leading companies will become more prominent.

As industry leaders, Zhejiang Longsheng and Runtu Co., Ltd. have significant production capacity advantages. Zhejiang Longsheng, as a global leader in dyes and textile chemicals, operates three major business segments in its manufacturing division: domestic dyes, DyStar, and intermediates. The company has an annual dye production capacity of approximately 300,000 tons and an intermediate production capacity of about 120,000 tons. Leveraging its integrated intermediate production layout, the company stated that its dye production capacity will be further enhanced.

Runtu Co., Ltd., on the other hand, has a total annual dye production capacity of nearly 238,000 tons, including 118,000 tons of disperse dyes, 100,000 tons of reactive dyes, and nearly 20,000 tons of other dyes. Its product sales market share consistently ranks among the top two in the domestic dye market.

In terms of performance, Runtu Co., Ltd. expects its net profit attributable to shareholders for 2025 to range from RMB 600 million to RMB 700 million, representing a year-on-year increase of 181.05% to 227.89%. The company also expects its adjusted net profit attributable to shareholders to range from RMB 270 million to RMB 370 million, reflecting a year-on-year increase of 26.75% to 73.70%. The company attributed this performance growth to increased operating profits from reactive dyes and basic chemicals during the reporting period compared to the same period last year.

It is worth noting that amid the price hike trend in the dye industry, downstream demand remains relatively cautious. According to a research report by Guojin Securities on February 7, the comprehensive operating rate of printing and dyeing enterprises in the Jiangsu-Zhejiang region for that week was 27.86%, down 23% from the previous week. The report analyzed that the relatively slow growth in orders from the downstream textile industry has led to a significant decline in the operating rates of printing and dyeing enterprises. These companies tend to purchase dyes based on actual production needs, with little enthusiasm for proactive stockpiling. The lack of positive demand-side catalysts has kept the overall market in a cautious and wait-and-see mode.