Imported gauze, bubbles are beginning to appear
“Imported gauze, bubbles begin to appear”
——Written before the “China Textile Raw Materials Summit”. ——Wu Faxin.
May 28, 2012. Qingdao.
May 31, 2012. Hangzhou.
A long time ago, we watched an old movie “The Crow and the Sparrow” starring Zhao Dan. There was a scene in the movie where people were speculating on cotton yarn. I still remember clearly. Before liberation, how many people who were speculating on cotton yarn on the beach in Shanghai could escape? A person who has experienced disaster? Seniors in Hong Kong’s textile industry regard cotton and cotton yarn as “white tigers”. A little carelessness in operation will lead to the embarrassment of “riding a tiger and being unable to get off”.
In the past three years, the import of cotton yarn and gray cloth has received more and more attention. The unprecedented market situation in 2010 made businessmen in the cotton and cotton yarn business “make ten years of money in one year.” This money-making effect has also attracted more and more people. OTC funds enter the market. Companies and individuals that had nothing to do with the textile industry have also joined the overseas procurement army one after another. Banks have also released large amounts of letters of credit to encourage this overseas purchasing boom. Our supplier, a well-known textile company in Karachi, Pakistan, received 5 inspection, visiting and purchasing groups from mainland China on one day last month. This Pakistani friend was not happy about this. On the contrary, she told me worriedly that due to the large procurement demand from China in the short term, some local small businesses were extremely excited, adding a lot of equipment and manpower, and the workers had almost no training. This will invisibly push up the local raw material, energy and labor costs, push up the ex-factory price of local products, and reduce the quality of the products. Enthusiasm seems to be high in the short term, but once these “short-term demands” dissipate overnight If you go, there will be disastrous consequences. From the Dutch tulip incident in the distant 17th century to the garlic, ginger and cotton incident in Shandong, China, there are many examples of economic crises caused by the crazy speculation of short-term funds in history. The result of the Dutch Tulip Incident in the 17th century was that almost overnight, countless people became penniless paupers, wealthy businessmen became beggars, and some great nobles also fell into irreparable bankruptcy. Among the victims, there are both well-educated intellectuals and illiterate people who cannot read a single word, because greed has no class boundaries. History keeps repeating itself. Foam, like bacteria, will spread wherever there is soil where it exists. This is the case from the “Tulip Bubble” in the Netherlands to the “Internet Bubble” in the Wall Street capital market in the United States at the end of the 20th century. Now, it seems that the bubble has spread to China’s textile raw materials field.
However, because the transaction methods, pricing mechanisms, settlement channels, and quality disputes involved in international procurement of bulk commodities are completely different from domestic transactions, a ship that can sail in a river may not be able to cope with it in the sea. There are many cases of running aground on rocks. Mr. Shao, what would you think if I told you that there is a company in Changzhou, Jiangsu Province that is still struggling to digest the inventory of cotton yarn imported in 2010?
Seniors in Hong Kong’s textile industry regard cotton and cotton yarn as “white tigers”. A little carelessness in operation will lead to the embarrassment of “riding a tiger and being unable to get off”.
Cotton and cotton yarn are becoming more and more like speculative commodities and are divorced from the attributes of raw materials. Price fluctuations are increasingly affected by capital and are divorced from the fundamentals of production and consumer demand. There was a period of time when the price of imported cotton yarn gray fabrics was even higher than the domestic price based on quotes from middlemen. Since the terminal consumer market has not yet started, a large amount of inventory of raw materials and finished products is accumulated in various links of the supply chain. To give a vivid example, a large amount of farmers’ agricultural products are stranded in wholesale markets and restaurant kitchens, and are not consumed by end consumers. The final outcome is that they rot and deteriorate. The apparent prosperity cannot hide the real crisis. The slightest disturbance will cause an avalanche effect, and small-scale local collapses are not very far away.
We have conducted on-site surveys and found that at the Beijing International Yarn Exhibition in the spring of 2012, 2/3 of the visitors were not end buyers in the textile industry, but trading companies and middlemen. At that time, people were almost unanimously optimistic about the future cotton market. Historical experience tells us that when an economic bubble inflates, the public’s chasing psychology may turn it into a speculative wave with serious destructive power. Fanatic people who have lost their sense due to greed will actively look for various “reasonable” basis for the bubble to blow up, constantly raising their price expectations, causing asset prices to continue to rise.
The Chinese government adopts a purchasing and storage policy to drive up the price of cotton. On the surface, it is taking care of the interests of farmers, but in fact it harms the textile industry. If we look at the problem from a large perspective, cotton cultivation is also a source link of the large textile industry chain. If downstream companies close down, how will upstream companies survive in the future? If the skin is gone, how will the hair be attached? A large amount of cheap and high-quality imported cotton yarn and gray fabrics will hit the domestic market in a short period of time, which is powerful enough to severely damage China’s textile industry. Wait until weIt’s too late now. It only takes a few minutes to strangle a person to death. What’s the use of having a bright future?
Any commodity that is the object of speculation, such as cotton and cotton yarn, often exceeds its price as a general commodity in the first stage and becomes the object of inventory hoarding in the production field. In the second stage, its price exceeds its price as capital and becomes the object of investment funds. , and the third stage is the price that exceeds the future income stream of credit aggregates. For example, banks release a large number of credit lines, trading companies do not engage in physical transactions but engage in agency issuance business, and cotton and cotton yarn become financial commodities. In a highly free currency and capital market, if a certain commodity is gradually capitalized and monetized, it may replace currency (cotton and cotton yarn become financial commodities). This behavior will definitely be punished by currency. Currency will cause this commodity to completely lose the credit it has gathered, until it goes bankrupt.
The long-term trend of bulk commodities such as cotton and cotton yarn is bullish. The question is, how long can you survive in the market?
Qingdao in the afternoon of May 28th and Hangzhou in the afternoon of May 31st. At the “China Textile Raw Materials Summit”, I will give a long report: “Undercurrents—New Pattern of Gauze Imports”. At that time, I will share with you the new experience of cross-border procurement of textile raw materials and tell you the real new market trends.
Author’s blog address: http://blog.sina.com.cn/wufaxin
Email: [email protected]
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