In the first half of this year, the recovery of domestic consumption and the “unexpected” orders brought about by the black swan of the epidemic have revived my country’s textile industry.
In the words of a practitioner in the textile industry: “We have never encountered such a hot market in China in 20 years.”
The textile performance in the first half of the year was gratifying
Survey data from the China Textile and Apparel Federation show that the prosperity index of my country’s textile industry in 2021 is at In the second quarter, it was 65.4, an increase of 8.3% from the previous quarter. It has been above the 50 boom-bust line for five consecutive quarters, the highest level since 2012, reflecting a significant improvement in business confidence and prospects.
Recently, about 43 listed companies in the textile and apparel industry have released first-half performance or performance forecasts, of which 38 have predicted an increase in performance, increased in the same direction, or turned a profit. Caihua News reporter statistics show that among the more than 19 listed textile manufacturing companies that have disclosed first-half performance forecasts and semi-annual reports, the revenue growth rate has exceeded 20%, and net profits have also increased to varying degrees.
Among them, Blum Oriental’s revenue and net profit increased by 48.98% and 303.97% respectively during the reporting period, and most textile companies that disclosed half-year forecasts also received Achieving impressive results, 6 companies including Huafu Fashion are expected to have net profit growth of more than 100% year-on-year, and Zhongyin Cashmere Industry is expected to have a net profit increase of more than 200%.
Two major factors have boosted the growth of textile performance
(1) Domestic demand market drives the recovery of textile manufacturing industry.
Since the outbreak of the epidemic in 2020, promoting domestic demand has become the top priority of our government. Against the background of a stable and improving economy, coupled with the numerous holidays such as the Spring Festival, Qingming Festival, and May Day in the first half of the year, the national sales of clothing, shoes, hats, and textiles above designated size increased by 33.7% in the first half of the year.
On the other hand, with the improvement of domestic manufacturing level in recent years and the “national trend” triggered by sports brands such as Li Ning and Anta, consumers have recognized domestically produced clothing. The sense of shopping has been enhanced, becoming a major driving force for the growth of retail sales of online and offline wear products.
The strong recovery of the downstream consumer side has driven the increase in the capacity utilization rate of the upstream textile manufacturing industry. Data from the Bureau of Statistics show that in the second quarter of this year, my country’s textile industry capacity utilization reached a historical high of 80.9%, an increase of 2.6 percentage points month-on-month and 8.2 percentage points year-on-year. The half-year textile industry capacity utilization rate was 79.7%, which was higher than the national industry level of 77.9% in the same period.
(2) Overseas orders from India and other countries are returning.
The rampant delta variant of the new coronavirus has caused the textile industry in India, Vietnam and other countries surrounding China to be in trouble. The good business environment of the domestic textile industry has the strength to undertake orders from these countries.
Especially in the Indian market, affected by the blockade measures during the epidemic, India’s apparel industry exports plummeted by 24% in 2020. A large number of textile orders previously transferred from China to India began to return to the country. Many textile companies in my country have successively accepted orders from India and Southeast Asian markets. Companies including Blum Oriental, Huafu Fashion, Hangmin Co., Ltd., and Lianfa Co., Ltd. have mentioned that they have taken orders transferred from overseas, and some companies are close to full. production operations.
The above-mentioned listed companies have not disclosed to the outside world the specific data on overseas reshoring orders they have undertaken since the epidemic. Except for a few companies such as Blum Oriental, most companies derive their income from domestic sources. Therefore, if the “duck in hand” of overseas return orders flies back, it will not have a big impact on most companies.
The trend of “return” orders is obviously slowing down
“Orders are now decreasing A lot of orders have been placed in July and August, but all orders from July and August have been shipped, but customers have not placed any additional orders. The peak period is in March and April, when there are the most orders.” On August 13, Mr. Lu, who is engaged in clothing production in Shantou, Guangdong, told reporters Said that the booming clothing exports in the first half of the year seemed to be a bit stalled.
In the first half of this year, the epidemic in India was relatively serious, and many orders were transferred to China in April and May. In the second half of the year, some industries in India and Bangladesh also recovered. Therefore, there was a “return” loss of orders in July and August.
“my country’s textile and apparel export markets are concentrated in the European, American and Japanese markets. As vaccination rates in these countries increase and herd immunity becomes normalized, and some developing countries begin to gradually resume production, there is a return and transfer of orders. Lan Qingxin, a researcher and doctoral supervisor at the National Institute for Opening-up at the University of International Business and Economics, analyzed to reporters.
When asked whether Mr. Lu and the small and medium-sized enterprise owners around him were worried about not having orders, Mr. Lu said frankly, “The price of raw materials in recent times has been the highest in the past two years. It doesn’t matter if we can’t receive orders. Otherwise, you will also lose money. After all, the clothing industry is a low-profit industry.”
As global epidemic prevention and control gradually becomes normalized, the trade demand for epidemic-related items weakens, and many manufacturing countries have restarted production due to the epidemic. The replacement orders brought are destined not to last long.
In recent years, China’s textile industry has been moving overseas. However, due to the impact of the epidemic last year, Chinese factories were the first to resume work and production. In many countries, the epidemic was still relatively serious, which affected their textile exports. , customers couldn’t wait any longer and went to China to buy textiles.This has brought about a certain amount of order transfer. Now that the production capacity of these countries is gradually recovering, the domestic intuitive feeling is that orders have been lost again.
Since most textile manufacturing companies are not involved in the upstream raw material field, but purchase raw materials at home and abroad, the price of raw materials such as cotton is the most intuitive factor affecting the growth of net profits of textile manufacturing companies.
Still facing many uncertain risks
As a major player in the textile industry The price of cotton, a raw material, has been on an upward trajectory this year, and the prices of textile raw materials, including chemical fiber, are currently at a high level in two years.
Since late June, cotton has started a new round of upward trend, with a cumulative increase of more than 15% so far. As of August 16, cotton spot prices in Jiangsu, Zhejiang and other regions have climbed above 18,100 yuan/ton. With the continuous destocking pattern of global and Chinese cotton and the continued strengthening of demand, cotton’s rising momentum is still strong. For textile companies with strong production and sales, this will weaken the company’s profit level.
In order to offset the impact of rising raw material prices, many companies have adjusted their procurement strategies according to market prices, replenishing their stocks at bargain hunting, and at the same time, stocking up on cotton rotation and import quotas to supplement resource procurement channels. Blum Oriental said, “85~90% of the raw materials of the company’s products are cotton. Since it has large cotton reserves, it has not been much affected.”
However, as cotton prices continue to rise, the recent The spread of the Delta virus has caused delays in the transportation of goods and raw materials, and textile companies are less willing to stock up on raw materials. In this case, textile companies will face a situation where profits are continuously compressed.
Zhao Fuchang, director of the Fiscal and National Governance Research Center of the Chinese Academy of Fiscal Sciences, pointed out, “Commodity prices have increased significantly this year, which is good for enterprises in the upstream of the industrial chain. If it can be transmitted to the terminal by It is borne by consumers and has little impact on midstream and downstream companies. However, the current situation is that the CPI increase is small and the price increase of front-end products cannot be passed on to consumer prices. Therefore, most of the price increase costs are shared in the industrial chain. As a result, a considerable number of enterprises will face pressure.”</p
