This week, the crude oil price plummeted and collapsed, and polyester raw materials followed suit, and everything was “green”. This dragged down the price of polyester filament. On June 23, polyester filament yarn collectively fell sharply, ranging from 400-600 yuan/ton. At the same time, the downstream industry has finally entered the off-season, and the order-taking atmosphere is obviously not as active as it was at the beginning of the month.
At present, most factories report that the trading volume is mainly bulk orders, with only a small number of new orders placed in autumn. With the cost end operating at a high level, the capital chain of the textile and clothing industry is under significant pressure, and the production enthusiasm of factories has also been hit.
Factory production enthusiasm is weak and the operating rate is low
A factory with 80 looms that produces outdoor fabrics has an operating rate of 80%. For a small enterprise, such productivity is really not high.
However, the operating rate of larger enterprises is also not high. The operating rate of a factory with 1,000 looms is only 60%.
At present, there are not many factories that can keep 100% of the machines running, and most of them have reduced the operation. But for some small-scale factories that receive good orders, they still keep their machines fully operational. For example, a factory with 152 looms producing four-way stretch and TR fabrics is operating at full capacity.
The off-season atmosphere is strong and the order volume is declining
Judging from the orders received by traders, most companies feel that the off-season is deepening, and orders are gradually decreasing. Of course, some companies still maintain a good order-taking atmosphere.
Mr. Xu, a trader exporting to Europe and the United States, said: “The order-taking situation is not good now, there are not many orders. The trade is relatively complicated, and the gray fabric products are fixed, so there is no outstanding shipment. The current order-taking situation is not good compared to before, and the off-season is ahead of schedule. Now, the off-season has started at the end of May.”
Mr. Hu, who specializes in down jacket fabrics, also said: “The number of orders has begun to decline. Nisi spinning had a lot of goods some time ago, and the orders are fewer than at the beginning of the month. The market has indeed become weaker.”
“The orders received now are quite considerable, and the orders can be maintained until the end of August. At present, the grid series has a lot of goods, and it is about the same as at the beginning of the month.” said Mr. Shen, a trader exporting to Europe and the United States.
Domestically, the sales volume during the 6.18 e-commerce festival was lower than expected, and there was no hot return of orders in previous years. Most e-commerce companies are still in the wait-and-see stage, and there is no return of orders. In terms of foreign trade, only some autumn and winter clothing orders and some foreign trade home textile orders that have been stocked in advance have just been placed, and the order volume has shrunk by nearly half compared with last year. At present, most of them are for proofing, and there are no obvious signs of substantive large orders.
Corporate profits dropped significantly
What is different from previous years is that the traditional peak season and the 618 Shopping Festival in the first half of this year did not stimulate the market atmosphere very well, and the entire market is still in a relatively deserted state. Under the pressure of high inventory, the price of gray fabrics is sometimes discounted and promoted, and other costs are also rising under the influence of the domestic epidemic and global inflation, leading to a decline in corporate profits.
Mr. Hu said that although the price of polyester yarn has dropped, profits have still declined significantly. Currently, corporate profits are around 10%-20%.
Mr. Xu said: “The average price of gray fabrics this year is actually about the same as last year, but customers have stepped up their efforts to lower prices, and there is obvious competition among peers for orders, so trade profits have dropped by 3% compared with the same period last year.”
The industry’s capital chain is under great pressure and the account period is extended.
Amid the downturn in the entire industry, factory gray fabric inventories continue to increase, with most inventories reaching about one month. Some weaving factories placed orders for winter warm fabrics in advance, resulting in overdraft conditions and significant pressure on the industry’s capital chain. This also makes this year’s receivables more difficult to collect, and the billing period has been extended.
“About 20%-30% of receivables are collected now. There are not many receivables this year, and the account period has been extended. The main reason is that foreign trade customers now have to wait for the garments to be completed before they can pay the balance.” Trader Mr. Shen said.
Mr. Xu, the trader, is still collecting last year’s payment and is slowly withdrawing it. He also said that there are more receivables this year because the payment cycle for gray fabrics has been extended by at least one month, and trade is settled monthly and is fixed.
In the early stage, raw materials rose sharply, and the price of gray fabrics rose slightly. However, the good times did not last long. The price of raw material polyester yarn has recently been favorable and the volume has increased, so the price of gray fabrics has returned to the previous level. In terms of order taking, there is also obvious weakness, and companies feel that the off-season is coming. However, June every year is the traditional off-season, and companies are accustomed to it. After surviving the off-season, the market will eventually recover.
Regarding the market outlook, companies believe that the epidemic factor is still very critical. Most companies agree that the main factors affecting market changes this year are high-priced raw materials and the epidemic. Due to the epidemic, there have been great obstacles in logistics, finished products cannot be exported, and foreign trade demand has decreased., the number of orders has decreased, but now the epidemic situation is obviously improving, and we still have expectations for the market in the second half of the year.
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