Has the textile and apparel industry broken out of the downturn? The export situation remains grim!

Original title: Has the textile and apparel industry broken out of the downturn? Under the dual pressure of order profits, the export situation remains grim!

Recently, the China Textile Industry Federation released data showing that the prosperity index of my country’s textile industry in the third quarter was 58.7, down 6.7 points from the second quarter. The reason why the textile industry’s prosperity declined in the third quarter was mainly due to factors such as the complex and severe international environment, the impact of the domestic epidemic and flood conditions, the continued rise in raw material prices, and tight energy and power. Under the combined influence of various factors, many domestic textile and apparel companies are facing the dual pressure of declining orders and declining profits.

New orders index fell in the third quarter

In September this year, under the influence of energy shortage and energy consumption dual control policies, many domestic provinces issued power curtailment notices one after another, including Guangdong, Jiangsu, Zhejiang and other major textile provinces, which caused many textile companies to have been affected to varying degrees.

In October, some major textile provinces continued to be affected by power restrictions. Enterprises had insufficient startup rates, terminal demand did not increase significantly compared with the previous month, and overall market sales remained sluggish.

For textile and apparel companies, a series of factors have disrupted the industry’s peak season production preparations. The ex-factory prices of some products have increased, and the delivery cycle has continued to lengthen. The pressure of shortages has begun to be transmitted through the supply chain. With the surge in raw materials, gray fabrics, fabrics, printing and dyeing, etc. are also affected by the trend, and there is a price increase in the upper reaches of the textile market.

According to industry insiders, policy adjustments have not spurred a sharp increase in production in the short term, especially as the price of chemical fiber raw materials has been rising, the profits of gray fabrics are relatively limited, and some orders have even been missed, and the production enthusiasm of some factories is difficult to improve.

The China Textile and Apparel Industry Federation pointed out that according to estimates, the new order index of my country’s textile industry in the third quarter of 2021 was 61.5, a decrease of 8.6 points from the second quarter, but market demand is still in the growth range. The main reasons are that the domestic epidemic has occurred from multiple sources and points, which has affected residents’ travel and consumption to a certain extent; international market demand has been weak and transportation costs have increased; coupled with the high base in the same period last year, it has also affected the growth of new orders. In addition, since mid-May, peak power consumption has occurred in large areas in the south, and the power supply situation in some areas has been tight, causing companies to be afraid to accept orders.

Textile and garment enterprises operate at low profits

Data released by the China Textile and Apparel Industry Federation show that in the third quarter of 2021, the profitability of my country’s textile industry declined compared with the second quarter. According to the survey, 38.9% of textile companies said that their profits increased in the third quarter compared with the second quarter, and this proportion was 11.1 percentage points lower than the second quarter survey results; 29.2% of textile companies said that their profits decreased compared with the second quarter, and this proportion increased from the second quarter survey results. 13.4 percentage points.

With the skyrocketing prices of raw materials, cotton yarncloth and fabrics, textile and clothing exports are in a dilemma.

From the perspective of cotton prices, in October, affected by factors such as the increase in market prices of bulk commodities, cotton prices at home and abroad rose sharply to a new high in the past 10 years, and fell back in the second half of the year. . During the month, large-scale picking and purchasing began in various cotton areas, and the purchase price of seed cotton rose sharply, resulting in higher sales prices of new cotton.

The China Textile and Apparel Industry Federation stated that the most important problems currently encountered by enterprises in exporting are insufficient international orders and rising shipping costs. 48.1% of sample enterprises listed insufficient international orders as the first problem facing enterprise exports, with 20.0% % of the sample companies listed rising shipping costs as the number one problem facing their exports.

In addition, due to the impact of the epidemic, factors such as congestion in port terminals and container shortages in many foreign places have not only led to a significant increase in transportation costs, but also extended the transportation cycle. Once delivery is unable to be made on time, there is a risk of order cancellation.

Industry insiders said that for many small and medium-sized enterprises, the bargaining power in terms of raw material procurement and product selling prices is not strong. While passively accepting the increase in raw material prices, they are unable to pass on the cost pressure. Most of the costs need to be absorbed by the enterprises themselves. , profits will inevitably be affected.

Based on their own production and operation status and feelings about the market, some companies have made outlook for the industry in the fourth quarter of 2021. On the whole, companies are more cautious in judging the industry’s prosperity in the fourth quarter, and generally believe that the operating speed in the fourth quarter is generally the same as that in the third quarter. Specifically, it is expected that production will maintain stable operation in the fourth quarter; new orders may increase slightly, and market demand is expected to expand; raw material prices may fall back from high levels.

Performance of the four major overseas markets

American market

Driven by the fiscal and monetary stimulus plan, U.S. apparel retail sales have hit record highs since March, breaking past records for six consecutive months. Coupled with the “worker flight” in Vietnam, the second largest clothing supplier in the United States, and the return of a large number of orders, China’s clothing exports have maintained rapid growth. In July-August, about half of China’s apparel export growth came from exports to the United States.

Exports to the United States stopped falling in September, with exports growing by 2.9% that month. Cumulative exports to the United States remain relatively high� Growth momentum: cumulative exports to the United States from January to September were US$42.84 billion, a year-on-year increase of 2.43%, and an increase of 21.2% over the same period in 2019. Among them, the large category of needle-woven clothing increased by 39.7%, an increase of 5.5% over the same period in 2019. As U.S. consumer confidence recovers, outside forecasts of U.S. economic recovery have become mainstream, and exports of consumer goods to the U.S. are expected to maintain a positive trend in the fourth quarter.

Japanese and Korean markets

Since the RCEP was officially signed at the end of last year, China’s textile and apparel exports to Japan and South Korea have continued to grow this year due to favorable policies. From January to August, the import shares of Japan and South Korea increased by 0.8 and 1.7 percentage points year-on-year respectively. However, in September, my country’s exports to Japan did not continue the improving trend in August and fell again. Exports fell by 10.1% that month, a decline that expanded by 6 percentage points from the previous month. The large category of needle-woven clothing only increased by 3.4%.

　EUMarket

Since the third quarter, the decline in exports to the EU has narrowed, and the growth of clothing has expanded. In September, the decline in my country’s exports to the EU further narrowed to 2.9%, among which the growth rate of needle-woven garments, a major category of commodities, expanded to 19%. From January to September, my country’s textile and apparel exports to the EU were US$35.18 billion, a year-on-year decrease of 17.4% and an increase of 14.6% over the same period in 2019. Among them, exports of needle-woven garments increased by 15.7%, an increase of 5.9% compared with 2019.

ASEAN Market

The recurrence of the epidemic in ASEAN has severely affected Southeast Asia’s manufacturing industry. Governments in various countries are eager to maintain their economies and gradually begin to adopt a “coexist with the virus” strategy to resume production and external supply. After my country’s exports to ASEAN fell for the first time in the year in August, they rebounded again in September. Exports to ASEAN increased by 14.6% that month, of which large categories of commodity yarns and fabrics increased by 18.6%. From January to September, China’s textile and apparel exports to ASEAN increased by 23.1% year-on-year, the fastest growing among the four major markets. An increase of 23.5% compared with the same period in 2019. Among them, the key commodity yarn fabrics increased by 29% year-on-year and 7.5% compared with 2019.

Reminder:

Clothing export growth will slow down

The growth rate of apparel exports in the second half of the year is expected to be significantly lower than that in the first half of the year. First, the export base in the second half of last year was large; second, the US fiscal stimulus policy has gradually weakened, and its stimulating effect on consumption is limited, and markets such as the European Union and Japan are weak in recovery. ; Third, the main international market procurement trend is to gradually reduce the proportion of procurement in China and increase procurement from neighboring countries. For example, in 2020, Inditex reduced the number of Chinese suppliers for the first time, by 13.6% year-on-year, and placed more emphasis on nearby procurement and production. The number of Turkish suppliers increased by 6.4%. In the first four months of this year, Turkey and Morocco’s market share in the EU increased by 1.2 and 0.4 percentage points respectively, and the share of Central American countries such as Honduras in the United States also increased steadily. It should be noted that the current return of orders is only temporary, and how long it can last depends mainly on the degree of resumption of work and production in neighboring countries. Fourth, foreign demand for anti-epidemic supplies has gradually declined, and prices have also gradually declined, which will have an increasingly smaller role in driving clothing exports.

AAA

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