Recently, the National Bureau of Statistics released the profits of industrial enterprises above designated size nationwide from January to June 2021. Compared with last year during the epidemic, all walks of life across the country are in a stage of rapid growth this year, including our textile industry.
However, the overall increase in the textile industry’s operating income, operating costs and total profits is not proportional. Both income and costs increased by nearly 20% year-on-year, but the profits were only rose 2.3%. The apparel industry’s revenue, costs and profits all increased by around 13%, with little difference between before and after.
That is to say, while the costs of the clothing industry have increased significantly, profits have also expanded simultaneously, and The textile industry is also facing skyrocketing costs, but is unable to expand profits through price increases, so profit growth is only 2.3%. what reason? Just look at the growth rate of chemical fiber raw materials in the first half of the year!
Rise driven by oil prices
Chemical fiber products rose broadly, with the highest Nearly doubled
Since 2021, the commodity market has continued to strengthen against the backdrop of demand recovery and inflation expectations. At the same time, OPEC, the Organization of Petroleum Exporting Countries, continues to implement production cuts and strictly controls crude oil supply. Therefore, international oil prices continued to rise from January to June, with WTI crude oil prices rising from around US$50/barrel at the beginning of the year to exceeding US$70/barrel in June, exceeding the oil price level before the COVID-19 outbreak.
Figure 2 2020-2021 WTI oil price trend
Affected by the rise in crude oil prices, the cost of chemical fiber has been rising steadily, and the chemical fiber market price has increased significantly from January to June. According to data from China Fiber Network, the prices of main chemical fiber products at the end of June increased to varying degrees compared with the beginning of the year. However, comparing the price increases of products in various links of the industrial chain, it can be seen that the price increases of chemical fiber products are generally smaller than the increases of their main raw materials and crude oil. Therefore, it can be judged that 1 ~The chemical fiber market in June experienced cost-driven growth.
Table 1 Price changes of main chemical fiber products and raw materials in the first half of the year
In terms of products, the three main categories of polyester, nylon and viscose staple fiber products have obvious market differences in the first and second quarters. In the first quarter, crude oil prices rose, liquidity was released, and speculative demand increased. Affected by various factors, the market rose significantly, with most products reaching the highest point in the first half of the year at the end of February or early March; the second quarter continued to decline, and factories frequently promoted shipments. Taking polyester filament POY as an example, inventory increased in the second quarter compared with the fourth quarter of 2020 and the first quarter of this year, which put a certain amount of pressure on working capital.
The price of spandex products has increased significantly. From the cost side, it is due to the sharp increase in raw material costs. The upstream raw material of PTMEG, the main raw material of spandex, is BDO, but PTMEG is not the only downstream of BDO. Another application field of BDO, PBAT (a degradable material), is in the “limited market”. The increase in demand under the favorable policy of “Plastic Order” has caused the price of BDO to skyrocket. As the second largest downstream of BDO, PTMEG is supported by the cost side to increase the price, which in turn drives the price of spandex to rise. From the perspective of product innovation, with the technological progress and product development diversification of the spandex industry, the differentiation and high quality of spandex can fully meet the needs of domestic and international markets. Its application scenarios and usage have increased significantly. Spandex has changed from the dominant position in textile products to “MSG” became a major ingredient.
Everyone knows that the price of raw materials has increased
Grey fabric weaving companies are worried
The price increase of raw materials has become a hot topic in textiles since the first half of the year. However, the well-known price increase of raw materials is difficult to be transmitted to the price of fabrics. . In sharp contrast to the popularity of raw material factories, the overall market situation of downstream textile orders is average.
According to an elastic fabric trader, their orders this year are indeed much better than last year, but the market is still far from the peak season. Therefore, when upstream raw materials, especially spandex, doubled in price, their fabric prices could not keep up, and customers simply would not accept the increase. In order to maintain profits, they cannot work hard on raw materials and fabrics, so they can only find a way out of printing and dyeing costs. For this reason, they can only find some printing and dyeing factories in surrounding remote areas, which adds a lot of manpower and time costs.
Compared to textile companies that have orders and profits, the market conditions of some companies are not as good as last year. According to a brand clothing supplier, their customers are mainly from Europe. Their orders last year were 50% less than in normal years. However, the market has not improved this year, but has dropped by 30% year-on-year. Another home textile fabric manufacturer also said that this year’s orders are 20%-30% lower than last year.
Although the current orders received by garment factories and data forecasts from professional institutions all reflect the improvement of the textile market in the second half of the year, the downstream weaving gray fabric market has not received substantial orders. , we cannot be blindly optimistic. Especially the current hot sales of gray fabrics such as four-way elastic, T400, and nylon fabrics can easily arouse the market’s following mentality. Manufacturers modify machines to mass-produce, and fabric manufacturersCrazy hoarding of goods is not advisable, and you need to be wary of such behavior.
According to the demand for gray fabrics in the peak season every year, the hottest ones are conventional varieties, and the inventory and production volume of conventional varieties are very large. Even in the peak season, the demand is very high. During this period, supply is still very easy. In terms of price, price wars are still raging in the market. For example, the price of spandex raw materials has soared recently, but the price of gray fabrics has still not followed suit. Even if the price of gray fabrics is likely to be raised uniformly during the peak season, based on the price increases in recent years, the range will not be too large, 0.1-0.2 yuan/meter. The editor believes that there is really no need to take greater risks and cause greater losses for the sake of 0.1-0.2 yuan/meter.
A weaving manufacturer that produces conventional varieties said: “The price war this year is still too fierce, resulting in no profit. It may be that there are too many machines in Henan, Anhui and other places. In addition, the raw materials are constantly changing, and the costs are also changing, but the price of gray fabrics cannot rise. Some of the gray fabrics sold make no profit even after the cost is removed. When customers lower the price, they lose money.”
The continuous rise in raw material prices is not a reflection of the recovery and prosperity of the textile industry. After all, many other links in the textile industry chain not only have to bear the worry of reduced orders, but also have to deal with rising costs. Perhaps as the peak season gradually approaches, the order dilemma of textile workers may gradually be solved, but whether the cost of raw materials will take advantage of the trend is probably a high probability event. </p
