Raw Material Crisis In International Textile Market

The global textile industry has not yet come out of the gloom of the financial crisis. The recent turmoil in European financial markets caused by the Greek and Spanish debt crisis and the continued fluctuation of the US dollar exchange rate are enough to make the textile manufacturers of every country nervous again.

By contrast, the impact of rising prices of raw materials on textile industry has been more and more rapid and direct. The price surge has almost spread to all raw materials and even the terminal market of the textile industry. Raw material prices such as cotton and other natural fibers have reached the highest level in more than a decade.

This raw material crisis has intensified the vibration of the international textile market.

Multiple factors push up the price of raw materials

When the demand for the terminal market flourishing, coincides with the continuous reduction of raw materials over the years, the huge imbalance between supply and demand makes the raw material crisis come to light.

With the improvement of the employment rate driven by the global economic recovery, people's daily consumption expenditure has gradually increased, and many consumers are buying "everyday" consumer goods for clothing.

According to the data released by the INSEE, the economic composite index of manufacturing, service, wholesale and retail in France reached 91 points in March this year, and has been improving for 10 months in a row.

Meanwhile, the euro zone consumer information index released by the European Commission in March also rebounded slightly.

In the European and American markets, the sale of clothing retail brands Uniqlo and J.Crew, in particular, should show consumers' preference for cotton and wool products with high cost performance after the financial crisis.

Compared with the warmth of the terminal market, upstream raw materials have encountered cold currents.

Excluding climate and other reasons, the natural fiber industry for 10 years, low prices triggered by the reduction of production gradually penetrated into the supply chain.

The current situation of Africa's cotton industry is very grim. The cotton industry in Guinea Bissau, Guinea, Niger and the Central African Republic has basically disappeared.

According to the data released by the African Cotton Industry Association, since 2004, the annual output of cotton in Africa has dropped from 2 million 40 thousand tons to 1 million 175 thousand tons, a decrease of 42%, and the annual output of cotton fiber from 1 million 200 thousand tons to 430 thousand tons, a drop of 64%.

When the financial crisis broke out, the price of international cotton fell, and the price of chemical fertilizer and other means of production rose, which caused cotton farmers to live beyond their means.

In Australia, the world's largest wool producer, influenced by factors such as the continuous rise of lamb prices in recent years, the sheep farm owners turned their attention to raising meat sheep and raised the proportion of lambs in the flock. Therefore, Australia's wool production continued to decline.

On the international market, the price of wool fell all the way from 2008, especially during the financial crisis, which has greatly dampened the confidence of Australian herdsmen in raising wool sheep.

In 2009, Australia's wool production reached its lowest level in more than 20 years.

Textile companies in various countries are busy protecting themselves.

Facing the continuous decline of textile raw material output and the high price, the big textile consumer and producer countries are performing a facial show. They are anxious or helpless, but are also in their respective ways to resolve the impact of shortage of raw materials.

The Bangladesh government is considering importing cotton yarn from some African countries directly to curb the sudden rise in the price of cotton yarn recently.

Faruk Khan, Minister of Commerce of Bangladesh, also proposed the establishment of a raw material warehouse to store cotton and cotton yarns to ensure that woven fabrics and clothing manufacturers in the country can purchase these raw materials at relatively low prices.

Pakistan, another big cotton consuming country, has to import about 3 million bales of cotton this year to meet textile production needs due to the serious shortage of cotton stocks in many textile mills.

Pakistan cotton production from last year's 11 million 300 thousand package is expected to increase to 12 million 700 thousand packets this year, but with 15 million 500 thousand packages of consumer demand is very large.

In recent years, India has issued a ban on cotton exports. Cotton imported from West Africa, the United States and Brazil can only be pported to Karachi port in July, making the Pakistan textile industry facing a more severe shortage of raw materials.

At present, the price of cotton in the international market is about 85~90 cents per pound. Pakistan's imports of 3 million bales of cotton will cost 900 million ~10 billion dollars.

India, which issued a ban on cotton exports earlier, has continued to guarantee the supply of domestic cotton yarn. A senior textile official in the country has revealed that cotton planting area in Punjab and India is expected to increase by 10%~15%, and cotton production is expected to reach 890 thousand tons and 808 thousand tons.

However, insiders predict that even under the current high price level, farmers may have to spend years to increase production on a certain scale.

The terminal market will be affected.

Although it is not yet clear that the price surge will affect the mainstream consumer market to a large extent, it is an indisputable fact that the cost burden on the fabric and clothing enterprises in the middle and lower reaches of the entire textile industry is already an indisputable fact.

These enterprises will face the dilemma of raising product prices or shrinking their own profits.

The VF Corp clothing company, which owns Levi 's and Wrangler denim brand, is experiencing substantial fluctuations in the cost of denim fabrics.

According to convention,

PCCA is a denim factory in Dezhou, USA, mainly exporting fabrics to factories in Latin America.

Jack Matthews, vice president of fabric sales at PCCA, describes that the current price volatility is almost the craziest thing he has ever been.

According to statistics, in the first 3 months of 2010, the import of American jeans increased by 12.8% over the same period. The total demand of this year is expected to exceed that of third consecutive years. The average cost of imports of jeans will increase by about 3.2% this year.

However, some people in the industry have some reservations about the impact of this rising price trend. Sean Alim, chief Merchandiser of John Lewis, British department store, said that the cost price of the company has not been seriously impacted, because most of their inventory is purchased in advance, up to a year ahead of schedule. "Lewis"

Another economist analyzed that the high price of fiber may not seriously affect the price of manufactured goods, because the average price of raw materials in textile production costs is about 15%.

In the long run, the purchasing power and consumption power of the market have not been substantially improved, but because of the rising cost, the passive price increases have not been sustained for a long time at the expense of the profits of enterprises.

On the positive side, the increase in upstream raw materials will affect the terminal market for a certain period of time, and the promotion of global economic recovery will probably become a strong support for the terminal market over a period of time.

After all, the economic crisis has made us realize that the weakness of the terminal market is not price, but consumption.

If the consumers are boldly shopping with the economic recovery, the rapid growth of emerging economies will alleviate the pressure on the terminal market to a certain extent.