2021 is still a bit special for many industries, because since the beginning of this year, many products have experienced price increases.
The prices of various raw materials in the textile market have increased. More importantly, with the return of textile orders from India and other Southeast Asian countries, domestic textile companies have now taken on a large number of orders. However, an increase in orders should be a good thing, but many companies are worried. Against the background of rising raw materials, the profits of these textile companies have been repeatedly compressed, and there are even cases where they are afraid to accept orders.
Data show that from January to May 2021, the country’s textile and apparel exports were US$112.69 billion, a year-on-year increase of 17.3%. Clothing exports in May alone reached US$12.2 billion, a year-on-year increase of 37.1%. However, the prices of reserve raw materials and textile raw materials have been rising continuously, and the ex-factory price of cotton yarn has been adjusted “once a day” or even “twice a day.” Many people are curious about this: Is the peak production season for the textile industry coming? In fact, the pressure faced by enterprises is foreseeable.
For the textile industry, cotton yarn can be said to be the raw material with the greatest demand. However, starting from the second half of 2020, the price of cotton has continued to rise, and yarn prices have also been affected. Rough statistics show that the cost of gray fabric production by enterprises has generally increased by 20% to 30%.
While the prices of upstream raw materials are rising, downstream companies do not have much “right to speak.” Do not dare to increase the retail price at will, otherwise you will easily lose customers. This is why we say that while order volume increases, corporate profits decrease.
Facing the current situation, many textile companies have some “regrets” because the textile industry market was in a downturn last year due to the impact of special circumstances. This year, many companies have begun to cautiously stock up on goods. They basically buy as much raw material as they need. Unexpectedly, raw materials have increased sharply this year, and many of the orders in hand are based on market prices from the year before. Naturally, profits will disappear under this increase. Against the background of successive adjustments in textile raw material prices, some companies have discovered new business opportunities.
Based on the feedback from customs clearance cotton yarn traders in markets such as Guangdong, Jiangsu and Zhejiang, the quotations of Indian yarn, Pakistani, Vietnamese yarn C32S, C40S and JC32S, JC40S cotton yarn are of the same count as domestic ones. , cotton yarns of the same quality are basically in line with each other and even have an upside price of 300-500 yuan/ton (some brand yarn price differences are even greater), such as C32 high-matching package bleached yarn: the light textile market quotations in coastal areas are concentrated at 25,500-25,800 yuan/ton, while India and Pakistan The quoted price of brand C32 packaged bleached yarn reaches 26,000-26,200 yuan/ton.
Why do Chinese weaving companies and middlemen still actively inquire and purchase prices even when the quotations are upside down? The analysis mainly has the following reasons:
First, since 2021, driven by the Federal Reserve’s continued low interest rates and the successive introduction of strong economic stimulus packages by the US government, including the Indian rupee, Vietnam The currency such as the shield continues to depreciate against the US dollar, which is beneficial to cotton yarn exports.
Secondly, cotton yarn traders generally adopt the “high quotation, big discount” marketing method. It is not uncommon for the actual transaction price to be 200-300 yuan/ton lower than the listed price. Although some traders offer high prices, they allow various settlement methods such as credit purchases, acceptance bills, and domestic letters of credit.
Third, the medium and high C32/C40S yarns in Vietnam, Pakistan, Indonesia and other countries are mainly high-grade, high-index American cotton/Brazilian cotton/Urban cotton/West African cotton (Australian cotton It has also gradually opened up markets in Southeast Asian countries). Compared with domestic cotton yarn, the cotton grade is slightly higher (cotton yarn strength, CV value, number of neps and other indicators are better), and the weaving loss is also dominant.
Fourthly, the RMB has appreciated sharply in the first half of 2021. Domestic cloth factories and textile and clothing companies have bypassed cotton yarn exporters in Southeast Asian countries and large domestic import companies and placed orders directly with India and Vietnam. , Pakistan and other countries, which will help reduce costs and improve the competitiveness of cotton textiles and clothing.
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