The Russia-Ukraine war affects the whole body! Fluctuations in raw material prices caused by petroleum will further affect downstream textile prices. The instability of raw material prices will cause certain problems for companies to purchase raw materials. Exchange rate fluctuations, shipping and land transportation obstructions are undoubtedly major constraints faced by foreign trade companies. However, the editor believes that the current market is too pessimistic about the market. Although the “Gold Three Silver Four” market is not strong in the peak season, orders are still expected to open slowly!
Recurrent situation between Russia and Ukraine
Overall textile demand in India will decline
According to foreign reports, the spinning industry in the Indian state of Gujarat has been hit by soaring raw material prices, and they are worried that demand for cotton yarn will fall due to ongoing tensions between Russia and Ukraine. As the domestic cotton price in India has risen from nearly 50,000 rupees/kander (356 kg) to about 80,000 rupees/kander, the production costs of textile mills have increased significantly. However, due to limited demand, downstream manufacturers are unwilling to pay higher yarn prices, so the price of cotton yarn has not followed suit.
Currently, cotton prices in India have almost doubled and most export manufacturing units are losing money. And now geopolitical issues between Ukraine and Russia pose new challenges. As crude oil prices rise, production costs will rise further, which will also have an adverse impact on logistics costs. Bogra, chairman of the Gujarat Textile Association, said that if the war situation continues for a long time, the overall textile demand will decline and cotton fabric manufacturers will become more cautious in purchasing cotton yarn. The price of cotton yarn has dropped by Rs 40 per kg compared to last month.
Pakistan and India factories
They are working hard to find orders from China.
Recently, demand from some textile exporting countries has shown signs of weakening. External prices have dropped significantly with the Russia-Ukraine war, and foreign factories have a strong willingness to ship. Due to the sudden severe situation in the overall foreign trade, factories in Pakistan and India have worked hard to find orders from China, but prices remain upside down. The 10-count second-line price of Basha is about US$3.42/kg, which is 6% lower than the quoted price of US$3.64/kg at the beginning of the year. However, it is still 1,000 yuan/ton higher than the spot price in Guangdong, with a small amount of transactions. India has also immediately cut prices to cater to China’s needs. 32 combs were sold at US$4.55/kg, down 5% from last week, but the transaction was weak and the transaction was small. Overall, the current market confidence is insufficient. The shipping speed of yarn supply chain companies is about 1/3 of the same period in previous years. Export orders are scarce, domestic demand is insufficient, and the market is worrying.
At present, textile raw materials are generally in a high and volatile market, but downstream demand remains weak. At present, corporate profits are gradually shrinking, raw materials are fluctuating at high levels due to the situation in Russia and Ukraine, but prices have not increased, and there are even signs of decline. Enterprises are fragmented, and small and medium-sized enterprises are frequently reducing production and suspending operations.
The “Gold, Three, Silver and Four” market is expected to start slowly
The entire downstream industry has not yet fully absorbed the increase in production costs from upstream. At the same time, under the contradictory situation of high costs and weak demand, the product profits of downstream companies have been swallowed up, market contradictions are acute, and problems such as the fragile industrial structure have become increasingly obvious.
The market still has certain expectations for the peak season demand from March to April, but judging from the performance in early March, demand is likely to be sluggish during the peak season.
The downstream operating rate is weak year-on-year, the inventory is at a historically high level, and the inventory pressure is relatively high. Recently, the domestic epidemic has spread in many places, and various regions have stepped up prevention and control measures and insisted on “dynamic clearing”, which has had a certain impact on the production, transportation, and sales of some cotton spinning enterprises and the operations of some traders in the light textile market. Following the suspension of the Dongguan Dalang Wool Trading Center and Hangzhou Sijiqing Clothing Street, Huzhou Zhili Children’s Clothing City and Zhili International Textile City also issued announcements to close indefinitely. Some small and medium-sized cotton spinning enterprises in Henan, Shandong, Hebei and other places have reported that with the escalation of epidemic prevention and control, not only cotton procurement and transportation have been affected to a certain extent, but also inquiries and purchases by weaving enterprises and cotton yarn traders in coastal areas of Guangdong, Jiangsu, Zhejiang, Shandong and other places , shipments have also slowed down compared to mid-to-late February. Under the premise that cotton yarn inventory has gradually increased and working capital has tightened, expectations for phased production reduction and suspension have increased.
However, we should not be overly pessimistic about the market in the short term. Due to further compression of profits, textile companies maintain a buy-and-use model for raw material procurement, and industrial inventories have fallen to relatively low levels. Recently, the terminal apparel industry is holding a spring order fair. Although overseas consumption has peaked, there is still motivation to continue placing orders to replenish stocks. In March, textile companies have a phased demand for raw material replenishment. The “Gold, Three, Silver, and Four” market is expected to slowly start. At that time, there may be a round of restocking, which will still support the price of textile raw materials in the short term.
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