Since March of this year, the prices of textile raw materials, yarns, and grey cloths in China have been falling. In two months, the price of cotton, polyester staples and sticky staples fell by 5,000 yuan, 1,700 yuan, and 5,400 yuan per ton, respectively. However, the production and operation status of textile companies did not show any significant improvement. High raw material prices, rising labor costs, and money supply The “accumulative superposition†effect caused by such unfavorable factors as tightening, renminbi appreciation, etc. will have an even greater impact on companies.
Capital tight inventory costs are difficult to drop
Wu Weifeng, assistant to general manager of Jiangsu Sumeida Textile & Textile International Trading Co., Ltd., told reporters that for raw orders that have already been purchased, there is no point in reducing the price of raw materials. Only those orders that were made 1–2 months ago, because the fabrics have not yet been purchased, the prices can be talked about, perhaps they can be slightly lower, and they will get some profits.
Zhu Qingyi, a light industry researcher at China Investment Advisors, believes that the main reason for the drop in cotton prices after March is the availability of sufficient inventory and the reduction in downstream demand. "Because of the tight capital chain and the increase in inventory, the operating conditions of textile and garment companies are likely to deteriorate."
According to Zhu Qingyu, the two sides of the capital chain of textile companies are out of touch in procurement and sales, and it is difficult for companies to recover funds.
Wu Weifeng said that since the central bank raised the deposit reserve ratio four times this year, the interest rate of ** has risen accordingly, and the capital chain of textile and garment export companies has been tight.
Due to fluctuations in cotton prices, tightening of credit policies, and various types of cost increases, the current sales of textile companies have been sluggish, and they have maintained a wait-and-see attitude towards lint purchases. Qu Weihua, head of the department of Huafang Co., Ltd., said that because the estimated cotton price may drop, the company did not purchase large amounts of high-priced cotton in the previous period.
Increase or loss, loss or loss
Relevant textile professionals say that falling raw material prices may reduce the company's production and operation costs in the medium and long term, but in the short term, it may adversely affect the company. Wang Qianjin analysis: "The decline in cotton prices will affect and affect the entire cotton industry chain. Because the price trend is not clear, companies will delay procurement, affecting corporate orders and corporate profits, this year, textile companies will face greater difficulties in profitability."
The price of cotton cannot rise and it cannot afford to fall. For enterprises, the cost of price increases surged and the profit cuts fell. Qu Weihua said: “In the past two days, the price of cotton in Shandong has fallen to 22,000 yuan – 23,000 yuan per ton, which is already 5,000 yuan – 6,000 yuan less than the original price, and the company’s raw material cost pressure has eased, because it cannot predict the future. At what price the cotton will be reduced, the company will purchase cotton in small quantities according to the order status.The order status is better than the previous one, but it has not improved much.Because the foreign customers are waiting to see what the cotton price will be lowered to, then decide on the order. ."
Wu Weifeng pointed out: "Bargaining is a process of change. The price of raw materials has dropped. Customers will also lower prices. In addition, due to the abundant supply of cotton and the low prices, many cotton orders have been transferred to countries such as Bangladesh and India."
The "cumulative superposition" effect fades
Although cotton prices have experienced a slight decline recently, the low value-added products of the Chinese textile and garment industry, coupled with rising labor costs, tightening monetary conditions, and appreciation of the renminbi, and heavy inflationary pressures have caused Chinese consumers’ willingness to consume to continue to decline. The slow growth of domestic demand in the industry is not conducive to the improvement of the production and operation status of textile enterprises.
These factors will "accumulate and stack up," and pressure on companies will gradually emerge. Wang Qianjin said that from last year to the first quarter of this year, these factors have become more and more constraining to the industry's production and operation. According to his predictions, the profit indicators for the textile and apparel industry that have not been announced for the first five months of this year will show a significant slowdown in growth, and the second quarter and the third quarter of this year will be a difficult period for textile companies.
Zhu Qinglu believes that there are still many obstacles to industrial development, but the predicament of textile companies will not continue to deteriorate. On the one hand, cotton prices will tend to be stable over a long period of time. With the gradual increase of downstream demand, the profit space of textile companies will gradually be released. On the other hand, due to the recent scarce rainfall in the Yangtze River Basin, this year's cotton cultivation may have an impact. It is expected that the current cotton inventory will gradually be consumed and the cotton price will continue to pick up.
Capital tight inventory costs are difficult to drop
Wu Weifeng, assistant to general manager of Jiangsu Sumeida Textile & Textile International Trading Co., Ltd., told reporters that for raw orders that have already been purchased, there is no point in reducing the price of raw materials. Only those orders that were made 1–2 months ago, because the fabrics have not yet been purchased, the prices can be talked about, perhaps they can be slightly lower, and they will get some profits.
Zhu Qingyi, a light industry researcher at China Investment Advisors, believes that the main reason for the drop in cotton prices after March is the availability of sufficient inventory and the reduction in downstream demand. "Because of the tight capital chain and the increase in inventory, the operating conditions of textile and garment companies are likely to deteriorate."
According to Zhu Qingyu, the two sides of the capital chain of textile companies are out of touch in procurement and sales, and it is difficult for companies to recover funds.
Wu Weifeng said that since the central bank raised the deposit reserve ratio four times this year, the interest rate of ** has risen accordingly, and the capital chain of textile and garment export companies has been tight.
Due to fluctuations in cotton prices, tightening of credit policies, and various types of cost increases, the current sales of textile companies have been sluggish, and they have maintained a wait-and-see attitude towards lint purchases. Qu Weihua, head of the department of Huafang Co., Ltd., said that because the estimated cotton price may drop, the company did not purchase large amounts of high-priced cotton in the previous period.
Increase or loss, loss or loss
Relevant textile professionals say that falling raw material prices may reduce the company's production and operation costs in the medium and long term, but in the short term, it may adversely affect the company. Wang Qianjin analysis: "The decline in cotton prices will affect and affect the entire cotton industry chain. Because the price trend is not clear, companies will delay procurement, affecting corporate orders and corporate profits, this year, textile companies will face greater difficulties in profitability."
The price of cotton cannot rise and it cannot afford to fall. For enterprises, the cost of price increases surged and the profit cuts fell. Qu Weihua said: “In the past two days, the price of cotton in Shandong has fallen to 22,000 yuan – 23,000 yuan per ton, which is already 5,000 yuan – 6,000 yuan less than the original price, and the company’s raw material cost pressure has eased, because it cannot predict the future. At what price the cotton will be reduced, the company will purchase cotton in small quantities according to the order status.The order status is better than the previous one, but it has not improved much.Because the foreign customers are waiting to see what the cotton price will be lowered to, then decide on the order. ."
Wu Weifeng pointed out: "Bargaining is a process of change. The price of raw materials has dropped. Customers will also lower prices. In addition, due to the abundant supply of cotton and the low prices, many cotton orders have been transferred to countries such as Bangladesh and India."
The "cumulative superposition" effect fades
Although cotton prices have experienced a slight decline recently, the low value-added products of the Chinese textile and garment industry, coupled with rising labor costs, tightening monetary conditions, and appreciation of the renminbi, and heavy inflationary pressures have caused Chinese consumers’ willingness to consume to continue to decline. The slow growth of domestic demand in the industry is not conducive to the improvement of the production and operation status of textile enterprises.
These factors will "accumulate and stack up," and pressure on companies will gradually emerge. Wang Qianjin said that from last year to the first quarter of this year, these factors have become more and more constraining to the industry's production and operation. According to his predictions, the profit indicators for the textile and apparel industry that have not been announced for the first five months of this year will show a significant slowdown in growth, and the second quarter and the third quarter of this year will be a difficult period for textile companies.
Zhu Qinglu believes that there are still many obstacles to industrial development, but the predicament of textile companies will not continue to deteriorate. On the one hand, cotton prices will tend to be stable over a long period of time. With the gradual increase of downstream demand, the profit space of textile companies will gradually be released. On the other hand, due to the recent scarce rainfall in the Yangtze River Basin, this year's cotton cultivation may have an impact. It is expected that the current cotton inventory will gradually be consumed and the cotton price will continue to pick up.
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