How Long Can The Textile Industry Last?

As China's traditional dominant industries, the textile industry experienced unprecedented pressure in the first half of this year.

Under the pressure of RMB appreciation, rising labor costs and soaring raw material prices, many enterprises have been cutting margins, and the industry has even begun to worry that the overall competitiveness of the industry will be challenged.

At the beginning of this year, the overwhelming lack of work reports once occupied the important position of the major media. As a representative of the labor-intensive industry, the textile industry felt more and more directly and deeply about the lack of work.

The head of the import and Export Department of a home textile enterprise in Weifang, Shandong, told reporters that even when the workers were short of work, even engineers should be caught up in the production line. "Not only is the workers working, but the managers are also working. When they are busy, the production line and containers are normal."

It is noteworthy that the shortage of workers is not only in the eastern coastal areas, but also in Hunan, Sichuan, Inner Mongolia and other provinces and regions.

"Almost all factories have their production lines idle, because they are short of labor, so it is very difficult to make full use of their production capacity."

Said a person in charge of a linen textile enterprise in Hunan.

The problem of shortage of workers has not been completely solved. Instead, a wave of nationwide pay increases has brought new confusion to textile enterprises.

It is understood that this year, a total of 27 provinces and municipalities to raise or plan to raise the minimum wage standards, Jiangsu, Zhejiang, Guangdong and other foreign trade provinces, the adjustment range is more than 10%, and some provinces even more than 20%.

In recognition of this wave of pay increases, vice president of a silk enterprise in Zhejiang also told reporters that the industry is facing difficulties today. "The pressure brought by the pay increase to the textile industry in the second half of this year is likely to exceed the impact of exchange rate fluctuations".

In addition to the labor force, another important topic in the first half of the year is also closely related to the textile industry, which is the RMB exchange rate.

The average profit margin of 3% to 5% has become the consensus of the industry. If the RMB exchange rate appreciates one point, it is very likely that the meager profits will disappear.

Amid such worries, many textile companies had to be cautious when taking orders in the first half of the year.

In June 19th, the central bank's remittance decision was made public.

On the basis of market supply and demand and reference to a basket of currencies, the central bank emphasizes that the RMB exchange rate will not fluctuate substantially, and the "big stone" hanging on the head of textile enterprises has finally landed.

Deputy General Li Yizhong of Tianjin northern international group told reporters that the exchange reform should learn from the lessons of the sudden appreciation of RMB in 2008. The pressure on downstream clothing exports is still great, so the exchange rate should not fluctuate too much, otherwise the export enterprises will not be able to take longer.

He further stressed that gradual appreciation is OK, but not too big fluctuations, control between 1 to 2 points is the best.

Nevertheless, the reporter learned from many interviews that the current market trend of exchange rate movements in the second half of the year is still showing a certain degree of concern, and the uncertainty in the future makes them afraid to take long lists and large orders.

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If labor force and exchange rate fluctuations originate from domestic pressure, soaring raw materials will be a major problem in the global textile market.

In the June China Manufacturing Purchasing Managers Index (PMI), released in early July, the purchasing price index of textile industry reached 76.6%, and the pressure of raw material prices ranked first among all industries.

A Jiangsu Nanjing textile enterprise official told reporters that today we must take cash to factories and other goods every day. The price agreement signed before is totally out of line. The price given by the factory is almost changed one day.

Take cotton as an example, statistics show that from December last year, cotton prices rose by more than 30% year-on-year for 5 consecutive months.

Market participants generally expect that cotton prices will exceed 20 thousand yuan / ton mark in the second half of the year, and will continue to record the highest level in 10 years.

Not only that, prices of silk, wool and polyester also went wild all the way in the first half of the year, of which silk rose to its highest level in 15 years, and the IMF statistics show that the price of coarse wool used for carpet is at least the highest level since 1980.

The pressure of raw material cost faced by various types of textile enterprises is obvious.

The Shandong Weifang business executives said that many export enterprises now have orders, but no profit, and individual long bills will even suffer losses. "The price of finished products will never keep pace with the rising prices of raw materials."

In view of the situation of the textile industry in the first half of the year, some industry experts pointed out in an interview with reporters that in terms of the domestic market, enterprises with the ability to raise prices have begun to raise prices, but it is not the overall performance. "After all, in the domestic market, channels and brand costs occupy the vast majority of the comprehensive cost of the textile industry".

For exports, this year is bound to be a difficult year. It is likely that some of the orders will be shifted to cheaper places such as Southeast Asia.

In view of the concerns of the industry on the competitiveness of the textile industry, experts say that China's textile industry is relatively well matched, and its comprehensive competitiveness still occupies an absolute advantage. "Other countries may be competitive in certain aspects of the industrial chain, but overall, China's advantages are still obvious."