After leading polyester companies self-disciplined to reduce production by 30%, it is still difficult to change the negative feedback of downstream demand. Costs are difficult to transmit to end consumers, and the profits of the intermediate industry chain are affected. The entire industry has a phenomenon of “not prosperous in peak seasons and even weaker in off-seasons.”
The obstruction in price transmission extended from the first half of the year to the second half of the year
Polyester and gray fabric have become “barrier lakes”
In the first half of the year, due to the high prices of crude oil and resources, many textile raw materials were in a cost-driven price logic. The influence of fundamentals on the prices of textile raw materials weakened, and the prices of textile raw materials followed the cost changes.
Theoretically, rising costs will be gradually transmitted downward through the industrial chain, thereby ensuring profits in all links. However, in the case of poor demand, the market price of end products may fall into the difficult dilemma of “price but no market”. In order to ensure smooth sales, end consumer merchants are bound to tend to stabilize prices or sell at reduced prices to ensure income from end sales; Secondly, for the textile industry, the proportion of raw materials in terminal sales is less than 20%. The rising cost of raw materials is difficult to smoothly transmit to terminal clothing and textile sales. Therefore, the production of intermediate products must bear high costs.
In order to alleviate the pressure of losses, most companies chose to reduce their operating rates. From March to April, the operating rates of the polyester and textile industries dropped significantly, and were both at relatively low levels in history.
The start-up rates of the five major textile clusters remain low
Confidence dropped to the extreme
In the case of continuous decline in the downstream, confidence has dropped to the extreme, and the operating rate has also remained low. The major textile cluster markets have also reflected the market downturn.
Jiangsu Gray Fabric: This week’s business opening rate is about 70%, which continues to decline month-on-month. The prices of raw materials and products have fallen sharply, and the market’s wait-and-see sentiment has intensified. Some small factories in the surrounding areas have been shut down, and the operating rate is less than 50%. Downstream demand continues to be weak, and most foreign trade orders have been transferred to Southeast Asia. The current order balance on the machine is about one week. There are very few orders for pure cotton varieties, and blended varieties are relatively better than pure cotton varieties. Affected by uncertain factors such as the inversion of domestic and foreign cotton prices and the suppression of Xinjiang quilts, downstream orders are expected to remain sluggish.
Guangdong denim: The price of raw cotton has fluctuated greatly recently, driving the price of denim yarn downward. The quotation of pure cotton OEC 10 British denim yarn is about 16,000 yuan/ton, which is the lowest in recent times; the price of indigo dye supplier is 68,000 yuan/ton. . The drop in yarn prices has a direct impact on the company’s fabric quotations. Downstream users are worried about the risk of continued decline in raw materials and are more cautious in placing orders. At the same time, downstream market demand is weak and the operating rate is low. Commodity prices have generally fallen, companies’ willingness to purchase raw materials is weak, and downstream demand is weak. The market may continue to be sluggish.
Lanxi Gray Fabric: The downstream market was affected by the sharp fall in cotton futures. Orders were placed cautiously and almost came to a standstill. Inventory losses were incurred, and factories limited production and went on holiday to reduce losses. At present, domestic and foreign sales orders are not good, and the factory is deeply confused about the future market.
Jiangsu yarn-dyed fabrics: The overall market is weak, the total order volume is insufficient, and the opening rate has declined. Raw material prices fluctuated sharply, and yarn prices dropped significantly. Due to the sluggish market, customers are cautious in placing orders, and companies mainly focus on rigid-need purchases, putting revenue under pressure. Based on fluctuations in upstream raw material prices, companies have limited confidence in the market outlook.
Hubei pure cotton cloth: The market is currently light, with strong wait-and-see sentiment in the downstream and few orders. The operating rate is about 50%. Due to the high cost of electricity, production restriction measures have been taken. The traditional peak season is approaching, but there are no signs of market recovery, so we hope for an improvement.
At present, the demand for raw materials in major cluster markets has decreased, making transactions difficult, and the market volume is close to exhaustion. At present, on the one hand, enterprises are first faced with the problem of destocking; on the other hand, there is a lack of orders, resulting in more work and production shutdowns. Under the influence of downstream negative feedback transmission, textile companies are weak in replenishing their inventory and are purchasing small quantities as they are used.
After leading companies self-disciplined to reduce production by 30%
Polyester price efficiency faces another decline
The current difficulties faced by polyester are the same as those in the first half of the year. The negative feedback caused by the rapid decline in polyester raw material prices has led to an increase in polyester cash flow losses. At the same time, the dividends of inventory appreciation since May have disappeared for polyester companies, and they are facing the pressure of rapid depreciation. Polyester companies with high inventories, especially leading companies, are under increasing pressure to reduce production again. Against this background, several leading polyester companies have voluntarily reduced production by 30%. Under high cost and weak demand, textile profits have dropped significantly. Due to factors such as efficiency issues, hot weather, high inventory to be destocked, and off-season demand from July to August, demand improvement lacks class-based weakness. The combination of high temperature weather and increased willingness to destock polyester has resulted in a decline in demand. The price efficiency of polyester is likely to decline again.
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