Event background
On July 19, the news of the closure and liquidation of Jiangsu Changle Fiber Technology Co., Ltd. (hereinafter referred to as Changle Fiber) caused waves in the polyester circle. In the reporter’s impression, this old company once had a good industry reputation and advanced business philosophy, and was also a must-stop stop for industrial research in Jiangsu. All kinds of “halos” have gone from being dazzling to fading. Why has Changle Fiber gotten to where it is today? What kind of inspiration and thinking does its exit bring to the industry?
Some industry veterans bluntly said that currently, the chemical fiber industry is in the “pain period” of deep integration, and Changle Fiber is neither the first to shut down, nor will it be the last.
“Affected by the epidemic and the market environment, the company began to suspend production on April 12, 2022. After the epidemic improved, it was unable to resume production due to the impact of the industry. Until the company suffered serious losses and was unable to resume production, the company decided to shut down after research. “Jiangsu Changle Fiber Technology Co., Ltd. made the above explanation in the notice regarding the company’s closure and negotiations to terminate the labor relationship and economic compensation.
In this regard, the reporter also asked Xue Qiang (pseudonym), the person in charge of Changle Fiber, for confirmation. Xue Qiang said that the shareholders have shut down the polyester factory, the relevant equipment will be processed, and the land and factory buildings will be rented out. “We actively choose to stop and exit. The general environment is not good, and it is difficult for a single variety to resist the cyclical recession.” He said that the overall profit of the polyester industry has been losing money, and the company’s business operations have been bleak for a long time, so it is better to stop the loss directly. .
Changle Fiber is a typical representative of medium-sized enterprises in Jiangsu’s chemical fiber (polyester filament) industry. The maximum designed annual production capacity is 300,000 tons, all of which produce polyester POY, and more than half of the production lines produce porous fine-denier flat yarn, a differentiated fiber with good market prospects. “Judging from the current scale of the industry, Changle Fiber’s production capacity is relatively small, but it also has many advantages.” Wu Wenhai, a veteran in the chemical fiber industry, said. For example, the factory is located in Huangjing Town, Taicang City, Jiangsu Province, the hometown of texturing in my country. Deep in industrial clusters, sales are convenient, and production varieties can be adjusted in time according to changes in the downstream market to better meet customer needs.
The reporter learned that since the factory was completed and put into operation in 2012, it has shown a booming pattern of production and sales for many years. In the past 3 to 5 years, as the industrial concentration of the chemical fiber industry has continued to increase, leading companies in the industry have entered the stage of production capacity competition. The degree of integration and scale has continued to increase, and market competition has continued to intensify. Small and medium-sized chemical fibers without the cost advantage of scale have continued to survive. is compressed.
“When Changle Fiber was put into production, it was positioned to produce flat yarns with more market prospects, and it once led in this segment for many years. As ‘giant’ chemical fiber companies such as Tongkun and Xinfengming also accelerated the development of products in this field With investment in production capacity, market supply is saturated and entering a stage of surplus, Changle Fiber’s product advantages are gradually lost and benefits are gradually deteriorating,” Wu Wenhai said.
Since the outbreak of the global epidemic in 2020, the demand for textiles and clothing has been greatly hit. Small and medium-sized enterprises in various links of the industrial chain are far less capable of resisting risks than large enterprises in all aspects, and it is difficult to persist until the market improves. Nowadays, closing factories and liquidating them is also a helpless “stop loss” move for corporate shareholders. As a former member of the factory, Wu Wenhai also felt very sorry for the closure of Changle Fiber. “Although Changle Fiber is a medium-sized chemical fiber production company, its reputation is far inferior to Hengli, Shenghong and other companies in the same region, but it still has a good reputation in the industry, especially the management’s advanced business philosophy.” He said , in terms of sales, Changle Fiber has always implemented a low inventory strategy and attaches great importance to timely adjustment of product production plans according to customer needs. In terms of procurement, the company has recruited management talents who understand futures very early, and has focused on using PTA futures for price risk management since the beginning of production. We are at the forefront of the industry in terms of market hedging, futures purchase and delivery, and spot and contract goods purchasing using futures prices.
The “exit” of Changle Fiber illustrates the embarrassing dilemma faced by small and medium-sized chemical fiber manufacturing industries. In recent years, polyester production capacity has maintained a high growth rate, market competition has further intensified, and large enterprises have accelerated their competition for market share. The polyester industry has begun to clear out old production capacity, and Changle Fiber is only a microcosm of the Red Sea competition in the entire industry.
“In recent years, large-scale enterprise equipment has been put into production at a high speed, and industry competition has intensified. Faced with this pressure, small enterprises have correspondingly reduced their investment in the polyester industry, and investor withdrawals have also occurred from time to time. Since April this year, there have been continuous rumors in the market With the news that some textile companies are not operating well and are experiencing thunderstorms or bankruptcy, some supply chain financial companies have also been affected.” Chen Sheng, an analyst at Guomao Futures, said that with both domestic and external demand declining, the operational difficulties of polyester companies this year have been It is an indisputable fact, and the downstream spinning and weaving industry has a large backlog of high-priced finished products that are unsaleable.
According to Wu Wenhai, this year, even the leading “Big Mac” chemical fiber companies are facing tremendous pressure from continued high inventories and operating losses. Some leading companies have already issued a call for managers to take the lead in slashing salaries. High business operating pressure is not an isolated phenomenon, but a common phenomenon.�Maintain profits through the cycle. “Wu Wenhai said.
It can be seen that in recent years, as industry concentration has increased, large polyester companies have shown greater advantages in financing, policy research, staffing, etc., and their cooperation with investment research institutions and futures companies has Going deeper, the use of options also shows relative advantages. When the overall prosperity of the industry declines, the relative advantages of large enterprises will become more obvious.
In view of the current predicament, the best choice for enterprises is to appropriately reduce production to protect prices, actively shrink supply, and maintain low product inventory. On the one hand, it reduces inventory pressure and ensures corporate cash flow; on the other hand, it reduces the pressure of losses. In terms of raw materials, you can consider using financial derivatives such as futures or over-the-counter options to hedge exposure risks and manage the risk of severe fluctuations in raw material prices.
“Surviving the ‘labor period’ requires companies to make reductions.” Wu Wenhai said frankly that chemical fiber companies must reduce investment in projects or businesses that cannot generate short-term cash flow, increase inventory turnover rates, and reduce inventory occupying a large amount of working capital. He said: “Enterprises can use the futures warehouse receipt business to revitalize funds, and use financial derivatives such as futures and options to actively hedge the risk of product price fluctuations in daily operations. Reasonably formulate hedging plans, preserve the value of product inventories, strengthen risk management and control, and stabilize Enterprise’s production profits.”
According to the interviewees, the “labor pains” of the chemical fiber industry may be alleviated during the traditional peak season, but to truly get out of the situation, we need to see the macroeconomic stabilization and improvement. When residents’ employment and income grow steadily, their willingness to consume increases, and the industry enters a new boom cycle, the gloom will emerge and the light will come.
</p
