Recently, reporters went to Jiangsu Province for research and visits. I have mixed emotions during this trip. First, China is at a critical moment when the epidemic is spreading. Whether it can be controlled before the end of the year has a vital interest in whether the people can go home smoothly for the New Year. Second, as the scope of the epidemic increases, will it affect the production and sales of enterprises? It has a great impact, which must be of urgent concern to people in the cotton spinning circle.
This survey visited two or three companies. From the understanding of the situation, the operating conditions of the companies resonate with the market. In December last year, amidst the pressure, Zheng Cotton prices rose for a month in a row. It was in this unfavorable environment that the company’s product inventory began to decline and sales recovered. As the year draws to a close, companies are relieved of their pressure and finally breathe a sigh of relief. After all, companies need a lot of cash at the end of the year.
The deepest impression from this survey is that domestic enterprises are resilient in development. In the past 2021, the industry has faced many adverse situations, but it can always find ways and means to overcome them. To give two obvious examples, coal prices have risen sharply since last year, which has resulted in an increase in electricity prices. Ordinary people do not feel this significantly, but large electricity consumers feel it particularly deeply. Anyone who knows textiles knows that in addition to cotton and labor costs, the biggest cost in the spinning process is electricity. I remember that during the research the year before last, the electricity cost in the mainland during the day was only about 0.7 or 0.8 yuan/kWh (I can’t remember the details clearly) ), now it has risen to 1.1 yuan/degree, which is still a large increase, which will inevitably have a great impact on corporate costs. The nighttime electricity bill is less than 0.4 yuan/kWh, which is similar to the price in previous years. The difference between peak and valley electricity prices has reached nearly three times. The interviewed companies told us that on January 5, 2022, China officially entered the Minor Cold among the 24 solar terms. The folk proverb: “The minor cold is at 239, and the weather is so cold that the ground is so cold that it trembles.” It is in such weather that In the freezing season, the author started the first survey in 2022. To save money, we now reduce the power-on rate during the day, increase production at night, and try to use low-priced electricity to arrange production.
There is also a type of company that adjusts its product structure. Since last year, the price increase of polyester staple fiber and other chemical fibers has been much smaller than that of cotton. In order to reduce costs, many companies have turned to the production of blended yarn. When I asked about the order, the company replied that it would be within half a month or a month. Short-term orders were okay, and the profit of blended yarn was significantly better than that of pure cotton yarn.
Cotton prices have risen sharply since last year, and the spinning costs of many companies have been rising. However, there is always room for price increases, otherwise how can consumers accept it. We all know that cotton price transmission is currently experiencing big problems, and downstream customers do not accept it. The two sides have been competing for 2 months, and they are currently in a stalemate. It is difficult to tell who wins and loses in the short term. According to the author’s analysis, this competition needs enough time to gain room for cotton price fluctuations. In the short term, both sides have sufficient strength. Upstream companies insist on selling at high prices, but downstream companies do not agree. They believe that purchasing high-priced cotton will face great risks in the later period. As long as the answer to the contest will eventually be revealed one day, whether the two sides will happily shake hands and make peace, or whether it will end tragically, is hard to predict, and I dare not imagine it. Bi Zhong hopes for a happy ending, and I don’t know if it will backfire.
Let me talk about another reason why cotton yarn prices were weak some time ago. I don’t know if it is accurate, but it is at least one factor. During the weak and volatile period of cotton prices last year, cotton yarn traders found ways to remove inventory at low prices, which interfered with the sales of textile companies, so the market yarn prices were somewhat chaotic. With the continuous destocking some time ago, the pressure on traders has eased, and the inventory of low-priced cotton yarn has gradually decreased. This is exactly the opposite of textile companies. As production continues, low-priced cotton stocks in the hands of textile companies continue to decrease, and the cost of raw materials increases step by step. In the future, both textile companies and cotton yarn traders will purchase raw materials at high prices. As for Whether costs can be transmitted smoothly downstream requires attention.
The author learned that the upstream cotton companies have completed processing, and all they need to do now is to wait for the cotton market to pick up. However, the production of textile companies cannot be suspended because there are still a large number of workers to maintain, and a long shutdown is unimaginable. As long as there are orders , even if there is no profit, we still have to start production. It is nothing more than a question of the startup rate. From this point of view, upstream companies have certain advantages.
The Chinese New Year is coming soon, and textile companies will also arrange holidays. The companies visited probably have a holiday lasting about half a month, which is longer than in previous years. The textile industry will usher in the peak production and sales season after the new year. Whether cotton prices will perform well by then, or whether futures have overdrawn future expectations, the market needs to give an answer.
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