In recent days, there have been no news of price increases or sell-outs in the circle of textile people. Instead, polyester yarns have begun to decline due to the plummeting crude oil price. Although textile raw materials have been falling since the end of June, what is somewhat surprising is that the inquiry/purchasing intensity of domestic textile companies and middlemen has not increased significantly with the sharp decline in raw materials.
The reason is that on the one hand, due to the high temperature in recent days, the power supply situation in some areas of the country is relatively severe. Recently, there have been notices in the textile circle about the off-peak production of enterprises in many places. The production enterprises involved include many textile, printing and dyeing and chemical fiber enterprises. The opening of many textile printing and dyeing factories has been greatly restricted.
On the other hand, for textile companies, what they fear most is not price increases or decreases, but price instability. If you buy raw materials at a high price and then the price drops when they are produced, it is like a punch in the stomach. At the same time, orders are definitely the primary concern at present. Orders represent demand, it means that inventory will no longer accumulate, and it means that enterprises can continue to produce and operate normally. But the reality is so completely different!
China Chamber of Commerce for Import and Export of Textiles:
The order transfer scale of China’s textile and apparel industry in the first half of the year was approximately US$6 billion.
Since 2020, due to the shrinking global market and declining demand, the profits of China’s textile industry have suffered throughout the epidemic and will continue to suffer losses due to rising raw material prices.
Foreign analysis reports show that China’s textile industry has suffered huge losses since the beginning of 2020 because the industry has been unable to increase product prices. In addition, the order volume of China’s textile industry this year has dropped by 40% compared with last year.
Last year, India and Southeast Asian countries were affected by the epidemic, and textile orders flowed into China in large quantities. Now as the epidemic control in these regions and countries gradually shows results, the textile industry has also begun to recover. According to estimates from the China Chamber of Commerce for Import and Export of Textiles, in the first half of 2020, the order transfer scale of China’s textile and apparel industry was approximately US$6 billion, of which the order transfer scale of the cotton textile industry was approximately US$1 billion. The proportion of export orders for 26% of companies exceeds 30%, and the proportion of export orders for 39% of companies is between 10% and 30%.
Most garment factory orders this year will be completed in September!
The survey shows that 85% of companies said that customer orders have obviously migrated outward.
At the same time, more than 90% of companies said that compared with the second half and fourth quarter of last year, the current order plan has been shortened, and nearly 59% of companies have order plans for 13 months. According to import and export data, the growth rate of China’s clothing and home textile products has shown a relatively obvious slowdown trend. Most clothing factory orders this year will be completed in September.
Due to industrial transformation and upgrading, changes in the industrial chain layout, and the impact of the U.S. tariffs on China, China’s export orders had begun to flow out before the outbreak of the new coronavirus. According to data from the U.S. Department of Commerce, China’s share of U.S. cotton textile and apparel imports fell to 17.1% in 2021 from 23.5% in 2019. The share of cotton apparel imports dropped from first to second in 2019, and Vietnam became Second major supplier. China’s share of U.S. cotton textile and apparel imports fell to 15.3%, second only to Vietnam and Bangladesh, followed by India. In fact, the main reason for the market slump is insufficient demand in the consumer market due to epidemic prevention and control and shrinking foreign markets.
Cotton spinning orders are mainly transferred to India, and clothing orders are mainly transferred to Bangladesh, Vietnam, India, Indonesia, Cambodia and other countries. In the first half of 2022, Vietnam’s textile and apparel export performance has improved, with export volume reaching approximately US$22 billion, a year-on-year increase of 23%, reaching a record high. Statistics show that Vietnam’s clothing export volume ranks second in the world after China. Yarn exports are also increasing, with exports for the whole of 2021 reaching US$5.6 billion, while from January to June 2022 they are expected to reach approximately US$3 billion. According to the report, the China Chamber of Commerce for Import and Export of Textiles recently conducted a survey of enterprises, and 85% of the enterprises said that customer orders have obviously migrated outward.
On the whole, with the sharp decline in raw materials, the profit situation of cotton yarn and gray fabrics of textile enterprises has improved compared with May/June (especially some small and medium-sized manufacturers that buy raw materials as they are used and purchase on demand), but gray fabrics continue to accumulate inventory, Tightening working capital and a serious shortage of orders have forced companies to take measures such as limiting production, suspending production and even taking short-term holidays. A weaving company in Zhejiang said that its current hope is that domestic demand orders for the autumn and winter of 2022 and Christmas and Easter orders from Western countries can be received as soon as possible. The company can insist on not reducing production, layoffs, or shutting down production. July/August/September will be the big year. This is a critical period for the survival of some textile and clothing companies.
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