Since last Thursday night, the OPEC+ meeting extended production cuts until the end of April, and Saudi Arabia will still reduce production by an additional 1 million barrels per day. The expected increase in production has not been completed. International oil prices rose sharply.
On March 5, Brent crude oil futures stood at $68 per barrel, the first time since January last year.
On the evening of March 7, local time, a huge explosion was heard over the city of Dhahran in eastern Saudi Arabia. The Saudi Energy Ministry later issued a statement that the attack did not cause any casualties or damage to facilities. The city of Dhahran is an important oil town in eastern Saudi Arabia and the headquarters of Saudi Aramco, the world’s largest oil company, while the Port of Ras Tanura is one of the most important oil ports in the Gulf region and even in the world.
Affected by this, US and Burundi oil prices jumped higher on Monday. WTI crude oil futures stood at US$67/barrel for the first time since October 2018; according to Reuters quotes, Brent crude oil futures rose above US$71/barrel at the beginning of the session, with an intraday increase of 2.3%. Oil prices have reached a 15-month high. As the saying goes, a single move affects the whole body. Driven by the cost end, polyester yarn also showed a warm trend.
The price of raw materials has increased strongly, but gray fabrics do not dare to raise prices lightly
Compared to downstream textile companies, life is not so easy. First of all, raw materials are located in the upstream of the industrial chain, and they have the confidence to increase prices. However, the textile market has long been in a state of oversupply, even now Raw materials have risen sharply. How many companies have actually increased their prices?
“The prices in the market are very confusing now. All kinds of raw materials are obviously rising, but some people just sell cloth very cheaply, even if they don’t make a profit. Do it.” The cloth boss who has been engaged in textiles for more than ten years said helplessly. He believes that some factories may be trying to retain old customers. After all, business is not done only once. Another foreign trader also said helplessly: “Now I only plan to keep the 5% profit. I quoted a price to the customer recently, but I didn’t expect the customer to directly reply to cancel the order. Now foreign purchasing power has not returned to the state before the epidemic. Foreign trade orders Not much, they may also want to wait and see to see if the raw materials will fall.”
Another factory owner also encountered a similar situation. He said: “I was very happy to receive the order years ago. I thought I would have work done at the beginning of the year, but I didn’t expect the raw materials to rise like this. The price was negotiated years ago. Okay, now we are all losing money!” Some even said that they are scared when they see the orders now, and they don’t dare to increase the fabric price. They can only swallow this part of the increased cost themselves. If it continues to increase like this, it is really unbearable!
Raw materials are rising, orders may be transferred again
There are also some textile bosses who are very cautious about price increases. One of the important reasons is that they are worried that orders may flow back to Southeast Asian countries. When the epidemic was at its worst last year, a large number of foreign trade orders were transferred to my country. This part of the foreign trade orders was transferred to my country mainly because India and some Southeast Asian countries did not do an ideal job in epidemic prevention and control. As a result, the industrial chain was affected and many tasks could not be carried out as scheduled. Completed, some textile orders were forced to be canceled or redirected to countries such as China. But now that the epidemic has been gradually brought under control with the introduction of vaccines, it is very likely that these orders will return to production in Southeast Asian countries where prices are relatively cheaper.
The current sharp increase in costs has intensified the return of orders. Domestic labor, water, electricity, logistics and other costs are rising every year. In terms of price, they are not as good as those in Southeast Asian countries. There is really no advantage in comparison. “Raw materials have increased so much now. There is really no way out. If the price increases, you will die. If you don’t increase the price, you will die.” One boss said helplessly. But textile people should not worry too much. High-end fabrics and functional fabrics can only be made in China, and the profits are considerable. Therefore, taking a differentiated route and marching into the mid-to-high-end field is what textile companies should do in the future.
Furthermore, from the entire demand side, demand has not improved significantly. The foreign trade of clothing still faces great resistance to improvement, and dyeing factories have no imagination. In the post-epidemic era, it will still take some time for people’s consumption of clothing to recover, at least for now it is far from the pre-epidemic level. The price increase during this period was mainly driven by the cost side.
Of course, it is up to Boss Bu to decide whether to raise the price. If he does not raise the price, he will face losses or even insufficient funds. Raising the price may cause the loss of customers and orders. This is a dilemma. .
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