In October, the International Monetary Fund predicted that global economic growth will remain at 3.2% in 2022, but growth in 2023 may drop to 2.7% or even lower. The “2022 Trade and Development Report” released by the United Nations Conference on Trade and Development pointed out that rapid interest rate increases and fiscal austerity in developed economies, coupled with the crises caused by the new coronavirus epidemic and the Russia-Ukraine conflict, have turned the global economic slowdown into a downward trend. , predicting that global economic growth will further slow down to 2.2% in 2023. The economy has entered a downward cycle, residents’ demand for textiles and clothing has weakened, demand for textiles and clothing in Europe and the United States has shown signs of weakness, textile construction and exports in Southeast Asia have deteriorated, and there is still room for reductions in global cotton consumption.
The epidemic in Guangzhou shuts down thousands of factories
It is understood that within 1 square kilometer of the Kanglu area of Fengyang Street in Guangzhou, more than 100,000 people live, and there are more than 5,200 garment factories and warehousing companies , and most of them are upstream and downstream labor-intensive industries such as textiles, garments, and accessories.
Zhongda Textile Business District, the largest professional textile market cluster in the country, is also located here. Zhongda Textile Business District is the epitome of the garment industry in Guangzhou and even the entire Pearl River Delta. More than half of the country’s mid- to low-end women’s clothing is manufactured here.
There is a common saying in the industry: “National textiles look to South China, and South China textiles look to medium-sized enterprises.” Its business district has 59 professional shopping malls, more than 23,000 merchants, and more than 150,000 migrant workers, absorbing a large number of migrant population. Among them, Kangle and Lujiang Villages have tens of thousands of tons of goods coming in and out every day… They are the “most developed urban villages” in Guangzhou’s garment industry.
Currently, the Zhongda Textile Business District has notified all wholesale markets and logistics to suspend production and operation activities; the garment factories in Haizhu District have completely shut down.
However, November coincides with the “Double Eleven”, which is the busiest month for clothing online batches. With the current outbreak of the epidemic, all progress has stalled and orders have been lost!
There are also clothing store owners who are relatively calm, with many saying they are “already numb.”
Indeed, in the past three years, the epidemic has come and gone again, and the clothing wholesale industry has been severely tested. According to data from the China Textile Federation Circulation Branch, the total turnover of the 46 textile and apparel professional markets monitored in the first half of this year was 544.797 billion yuan, a year-on-year decrease of 8.7%.
As for Guangzhou, the “big brother” of China’s clothing wholesale market, it is foreseeable that the decline will increase after being hit hard by the epidemic.
Cotton spinning mills are operating at a low operating rate,Foshan cloth factory is operating at about 30%
Textile companies from various places said that the procurement atmosphere in the cotton yarn market continues to be dull, and orders can be called “short and compact”, and negotiating for goods has become a helpless move. At present, the lockdown situation in various places is severe, and logistics and transportation are basically at a standstill. The isolation measures have caused trucks to be afraid to go out easily, and the movement of people has been restricted. Exhibitions, chambers of commerce, and trading activities have been canceled. Fabrics cannot be sold and transshipped, and inventory pressure has increased.
The price trend of various types of yarns is different. The price of combed noil is firm, the price of open-end spinning is relatively stable, and the price of carded conventional yarn has fallen. The mainstream price of carded 32s in Xiaoshao area is 22900-23100. The mainstream price of combed 40s is around 25,800-26,500 yuan/ton, and the mainstream price of combed 21s in Shengze is around 21,000-21,200 yuan/ton.
In terms of imported yarn, the spot price has been adjusted downward slightly, and open-end spinning has remained stable. Some export companies have made rigid purchases for traceability orders. Logistics and the epidemic have affected transactions slowly, and the overall terminal demand is still weak. Judging from the operating rate, various regions basically maintain low operating rates. The operating rate of large spinning mills remains at around 60%, that of small and medium-sized spinning mills is basically below 50%, that of Foshan cloth mills operates at a low level of around 30%, and that of downstream spray mills is maintained at a low level. Water loom outages increased.
European and American textile and clothing demand shows weakness
U.S. textile and clothing imports have declined for four consecutive months, with imports from China falling even further. In September 2022, U.S. textile and apparel imports amounted to 8.82 billion square meters, a year-on-year increase of 6.2% and a month-on-month decrease of 3.5%, marking the fourth consecutive month of decline. Among them, clothing import volume was 2.68 billion square meters, a year-on-year decrease of 7% and a month-on-month decrease of 12.2%. The total volume of textiles and clothing imported from China in September was 2.98 billion square meters, a year-on-year decrease of 23%, and the amount was US$3.1 billion, a year-on-year decrease of 12%; of which the total volume of clothing imports into China was 930 million square meters, a year-on-year decrease of 28.4%, and the amount was US$2.17 billion. US dollar, down 9.8% year-on-year. The main reason for the decline in imports is that the purchasing power of domestic textiles and clothing has declined, leading to inventory accumulation. Data shows that U.S. wholesalers’ clothing and fabric inventories have continued to grow this year.
The European Union is under dual pressure from the energy crisis and high inflation, which has led to the weakness of textile and clothing consumption. France’s retail sales of textile, clothing and leather products in August were 4.05 billion euros (approximately US$4.07 billion), a year-on-year decrease of 2.9% and a month-on-month increase of 2.4%; Germany’s clothing retail sales in August fell year-on-year.7.9%, a month-on-month decrease of 6%, and the decline further expanded; Dutch clothing retail sales in August fell by 6.4% year-on-year, compared with an increase of 11.6% in July. In addition, the EU will also tighten tax policies in the future. Starting from March 1, 2024, all low-value goods imported from countries outside the EU will pay value-added tax, and the tariff on imported textiles will be increased from 17% to 30%.
The start-up of Southeast Asia has declined, and the demand for cotton has decreased, which is negative for cotton prices in the medium and long term
Since the beginning of this year, the operating rates of major textile countries in Southeast Asia have declined. As of the end of October, the operating rate of Vietnamese textile companies has dropped to less than 40%, the operating rate of Pakistani textile companies has also dropped to less than 50%, and the operating rate of Indian textile companies has improved slightly recently after falling below 50%, but it is still at a two-year low. . The main reason is that imports from Europe and the United States, which have major textile and apparel demand, have dropped, and orders from textile-producing countries have dropped.
In Pakistan, the current demand for yarn in the country has not improved, and there is a lack of demand in major export markets. At present, the country’s textile enterprises have also reduced their production capacity and are still dealing with inventory. In Vietnam, textile exports have declined year-on-year since September.
In the context of the global economic downturn, world textile and clothing consumption is facing challenges. The demand for textile and clothing in Europe and the United States has declined, and clothing imports have decreased. This has led to a decline in startups in Southeast Asia and a reduction in demand for cotton. In the future, global cotton demand will still be adjusted. The room for decline will have a medium to long-term negative impact on cotton prices.
Recent market trends of Zheng Cotton’s main contracts
On November 10, the main contract of Zheng cotton rose 0.69% to close at 13,130 yuan/ton. Affected by the Xinjiang epidemic and low purchase prices, the sales and processing progress of Xinjiang seed cotton this year has been slow, and transportation out of Xinjiang has been affected. Impact, but it has become a consensus that domestic cotton production will increase this year. On the demand side, the seasonal peak season has passed, domestic downstream operation rates and orders have declined, and the operation rates of major cotton consuming countries in the world have remained at a low level. In terms of inventory, due to the slow arrival of new cotton, the high inventory situation of old cotton has eased.
On November 9, China Cotton Reserve announced that the state reserve rotation will be suspended on November 11, 2022, and will focus on changes in national policies in the later period. The industry believes that due to the low transaction rate, the suspension of purchase and storage will have limited impact on the current cotton price.
According to the latest global production demand forecast released by the United States Department of Agriculture in November, global cotton production and consumer prices have been reduced in 2022/23, and U.S. cotton production and ending stocks have increased slightly. Among them, U.S. cotton production is expected to be 14 million bales, a month-on-month increase of 1.5%. Production reductions in the southwest region of the United States are offset by increases in other regions. The report is generally neutral.
Affected by the above multiple factors, it is expected that domestic and foreign cotton prices will still fluctuate in the near future. </span
