Textile Industry: Consumption Shrinking, Game Cost Rising

China's cotton premium shrank due to structural adjustment of textile industry

For a long time, China's cotton consumption nearly 1/3 depends on imports, and domestic cotton prices have been much higher than that of the international market.

For similar reasons, cotton futures in Zhengzhou over the past 4 years are also significantly higher than those in domestic stock market in terms of long-term premium.

However, with the adjustment of the textile industry structure, China's cotton premium has shrunk, and the phenomenon of rising water in the future contract of Zhengzhou cotton futures will also change in 2008.

Since 2007, under the accumulative effect of monetary tightening policy, the domestic cotton textile enterprises' financial situation has gone from bad to worse.

At the same time, the RMB continued to appreciate, the profit of foreign trade orders was eroded, and the order deteriorated.

Affected by the weakening of the international economic situation, the downstream demand for cotton textile products has slowed down, and the main business of cotton textile industry has been struggling at the margin of capital preservation.

Since the second half of 2007, the textile and garment industry has begun a prelude to structural adjustment, aggravated intra industry differentiation, and a large number of small and medium-sized enterprises have fallen or even gone bankrupt. Fixed asset investment, output and export growth have declined significantly. The decline in US demand has exacerbated this trend.

Data from 2008 May showed that the growth rate of fixed assets investment in the domestic textile and garment industry continued to slow down on the basis of the first quarter, and the growth rate of export growth in the two quarter also had a further downward trend.

It is worth noting that since the two quarter, domestic macroeconomic regulation, inflation and market concerns about the prospects for domestic economic growth have led to a slowdown in the growth of total retail sales of clothing consumer goods. The role of domestic demand in replacing investment and export pulling industry growth needs further observation in the future.

The continuous divergence of industry CPI and PPI index also indicates the possibility of further compression of industry profit space.

The RMB is expected to rise by 10% in 2008, and the price of chemical fiber will be highly driven by cost factors. The price of cotton will probably rise slightly, and the cost of labor, fuel power and loan interest rate will remain high, so the cost pressure of textile and garment industry will not be reduced.

The direction of the government's upgrading and elimination of backward production capacity will not change. Even if the export tax rebate rate is raised, it will only prevent the hard landing of the industry.

With the increase of labor costs, China's textile and garment industry no longer has cost advantages compared with other countries such as Southeast Asia, and the labor-intensive garment manufacturing industry has been pferred to Southeast Asia and other countries.

In recent years, China has accumulated a certain amount of textile technology, technology, talents and so on. Compared with the European Union, China still has a strong cost advantage, so the manufacture of medium and high grade textiles in the EU has been shifting to our country.

The effect of tax rebate policy on market psychology is greater than that in essence.

The textile and garment industry is precarious and expects the support policy to come out.

The accelerated appreciation of the renminbi, the increase in interest rates, the sharp rise in labor costs, and the pressure of environmental protection led to the rising cost of pollution control, resulting in an accelerated decline in the growth of the textile industry.

Textile industry association data show that in 2008 1-5, the total income and profit of textile and garment industry increased by 17.4% and 13.5% respectively, representing an increase of 4.8 and 10.6 percentage points respectively.

The superposition effect of various negative factors made the textile and garment industry in the first half of 2008 in a state of poor export, overstock and tight chain of funds.

The market environment of internal extrusion and external pressure has made it difficult for the spinning and weaving enterprises. We urgently need the support policies of the government so as to escort the upgrading of the industry.

Market rumors, relevant departments of the state are brewing new export tax rebates, the textile export tax rebate from the current 11% to 13%, the export tax rebate rate of clothing from the current 11% to 15%.

The author believes that the best timing for textile tax rebate reduction policy should be at the end of the three quarter. Of course, it does not exclude the government from other angles, and it has been introduced ahead of time to appease enterprises.

This may be a tax rebate adjustment policy, mainly to cope with the problems of textile and apparel enterprises, but from the long-term development of the industry, industrial upgrading and export restructuring is still the main theme.

According to our calculations, if the policy is promulgated, the net profit of the textile and garment industry in 2008 will be increased by 2 billion 979 million yuan and 9 billion 894 million yuan RMB respectively, and the net sales rate of the textile and clothing industry will be increased by 0.13 and 0.53 percentage points respectively.

Although this tax rebate policy adjustment has no high market expectation for the net profit of the industry, it can effectively curb the further expansion of the industry deficit, and largely alleviate the pressure of survival of the small and medium-sized textile and garment enterprises with relatively high export dependence, help enterprises to pass the difficult period before it, and provide a buffer period for the healthy and steady upgrading of the whole industry.

In the long run, this policy will enhance the confidence of export enterprises, which will not fundamentally change the trend of the boom of the garment industry.

Foreign funds have been eyeing the international cotton futures market, but the huge cotton inventory in the US has become the decisive force to suppress futures prices. If China's imports increase, it may help to raise futures prices. Although the probability of such a situation is not high, the possibility can not be ruled out.

The cost of new cotton will guide the direction of the current cotton price adjustment.

Recently, the market of some important commodities has changed greatly.

First, the market is increasingly recognizing that the price of crude oil has reached the top.

Before that, fund companies bought large amounts of crude oil futures and sold stocks, especially the financial sector.

The U.S. government's financial support for Freddie and Fannie and a series of other initiatives have made major changes in financial policy, which is rooted in the economic crisis rather than the presidential election.

ICE cotton futures are lower under the influence of the grain market selling. Although the turnover of Central Asian cotton, West African cotton and East African cotton has been good recently, the sale of American cotton is difficult to accelerate.

The California court of the United States has already voted $60 for containers from California port, which will further weaken the competitiveness of US cotton.

At present, with the increase of textile mills' procurement, the inventory of non American cotton varieties is becoming more and more intense.

According to current freight rates, East African cotton prices are cheaper than India S-6 cotton.

For Chinese textile enterprises, it is cheaper to pport S-6 cotton from India to China's main port than to Xinjiang cotton (not subsidized).

The US cotton container is pported to the main port from the west coast of the United States for us $600-700. Can the international shipping cost quote the US cotton FOB? Script src=>