Yarn profits are further compressed, and spinning bosses are choosing price wars

According to reports from cotton textile mills in Henan, Hebei, Shandong and other places, from late September to mid-October, driven by the “high opening and high rising” of the 2016/17 seed cotton purchase price and lint sales price, as well as the phased recovery in cotton yarn demand , the quotations of open-end spinning, ring spinning and combed yarn have increased by 300-500 yuan/ton as a whole, but because the increase is still significantly behind the cotton price, the pressure on the spinning mills has not increased with the increase in yarn prices. Significantly weakened, “not even a chance to breathe” is the view of most small and medium-sized cotton textile mills.

Judging from the survey, since October, the operating situation of mainland fabric companies has been severely differentiated. The few fabric factories that stocked cotton reserves at low prices in August and September are mostly operating at full capacity (some large cotton companies have begun to Purchase a small amount of high-quality, high-grade hand-picked cotton in 2016/17 as cotton). The profit situation of spinning companies using reserve cotton as raw materials is relatively optimistic. From October 11 to 13, the mainland market is not “Double 28, Double 29” reserves The cotton transaction price is 14,500-14,800 yuan/ton (directly affected by the near-month contract in Zhengzhou); other textile companies with small surplus grain reserve cotton, cotton from ports, 2016/17 real estate cotton and a small amount of imported cotton through purchasing trade As the price difference between new cotton and old cotton reaches 1,000-2,000 yuan/ton for the transition of Xinjiang cotton from warehouses to the mainland, the proportion of textile companies that have reduced or stopped production has increased. Small and medium-sized spinning mills and weavers in Xinye, Henan, Changzhou, Jiangsu, Changyi, Shandong and other places have The operating rate of cloth factories is only 25-35%.
As spinning yarn profits continue to be squeezed, many spinning mills have no choice but to embark on the old route: price war. A while ago, I came into contact with a cotton yarn middleman and started working with him. He said that in order to be a big customer this year, the gross profit per ton was only 30-50 yuan, which was barely enough for the transportation fee. He knew that there were several competitors. As long as he raised the price slightly, his competitors would immediately cut in, so he could only Such low gross profit.
I asked him how much goods he could ship in a month, and he said that with only 500 tons of customers, the couple and a follower were already very busy. I said, then you only have a gross profit of 20,000 per month. After paying the transportation fee, shop rent, labor, water and electricity, and not counting the labor of you and your wife, you are already losing money. He said, yes, but if you don’t do it, your competitors will step in immediately.
I am very familiar with this big customer and have been dealing with him for a long time. He has a very good reputation and a large volume. He is a banner in the fabric industry in South China. But I am very strange, very strange. The purpose of my business dealings with this big customer is to make money, not just to do business. If there is a slight problem, it will be compensation.
To be honest, for a husband-and-wife cotton yarn middleman, 500 tons per month is okay, but the gross profit of 20,000 yuan per month is extremely small. This colleague is obviously diligent, but he regards low-price competition as a business method as the purpose of business. I am particularly surprised why so many bosses would think of going down this road that is obviously a dead end.
Each of our units is just a drop in the ocean compared to the size of China’s fabric industry. Not to mention small units, even large units such as Huafang Weiqiao, even if they fall, it will only be a small splash at most, and it will never make a big wave, and it will definitely not affect the market. Your supplier has collapsed for any reason. There are still a lot of suppliers in the market. In the same way, if you use low-price competition to defeat a certain opponent, a large number of opponents will still appear. It is simply Wildfires can never burn out, even if there is no wind!
Huafang Weiqiao, these very large textile mills, used to use low prices to compete with other textile companies in the market. That was because they monopolized most of the country’s government subsidies, and used these government subsidies to compete with other textile companies. Textile companies compete, so Huafang Weiqiao can offer very low prices, so low that other textile mills can’t afford them. But now that their government subsidies are less, they can no longer produce the low-priced cotton yarns they used to have. At the same time, because of the vicious competition with domestic textile companies using government subsidies at that time, a lot of root causes have been left behind. Now, They only have less subsidies, but they are still much larger than many textile mills on the market, but they can no longer bear it and their scale has shrunk significantly.
The purpose of business is definitely to make a profit. Low-price competition is just one of the means of business. Loss-making low-price competition is a particularly high-end means. Only those with particularly strong financial strength and the short-term purpose is to occupy and expand a business. It can only be used if it has a stable market share.
The spinning industry like ours is simply not suitable for using such extreme and advanced methods. No matter what method you use to occupy a part of the market in the short term, as long as your quality, price, and service do not meet customer requirements in the next stage, customers will immediately find other suppliers in the Chinese fabric industry, which is as big as the ocean. The customer share you gained from this loss-making transaction will be wiped out in a very short period of time.

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