Analyzing The Rise And Fall Of Textile Raw Materials

Since the beginning of this year, prices of raw materials such as cotton have been rising all the way, coupled with rising labor costs. Many experts predict that the price of clothing will increase substantially in the second half of this year. The National Bureau of statistics data show that clothing products consumer prices are declining.

What is behind this "rise or fall"?

Rising or not?

Yes Dali dress Wu Yunfeng, general manager of the company, is a bit scratching the head: Fabric The price increases, the wages of employees have been raised, but the company's products dare not rush to raise prices.

Wu Yunfeng's mentality is quite representative in this year's clothing manufacturers.

Raw material cost: This is really up.

In July 5th this year, the domestic cotton "328 index" reached 18371, an increase of 43% over the same period in 2009, rising by 24% over the beginning of this year. The highest bid in history has surprised fabric companies. According to Qingdao customs statistics, imports of cotton at Shandong port increased by 65.1% and 1.3 times respectively, up 39% over the first 7 months of this year.

Cotton prices are rising, and fabric companies complain incessantly, which directly leads to the rising cost of raw materials for garment production and processing enterprises. Wu Yunfeng, a Dali company, introduced cotton yarn at the end of the year or 22 thousand yuan per ton, up to 28 thousand yuan this year, and the total cost of fabric rose by 1/4.

But the rising cost of raw materials is not a big problem for clothing manufacturers. Zhengzhou Ya Li Da Zhao Sunli, chairman of clothing company, said that the price of fabrics this year increased by 10-15% compared with last year. However, the proportion of fabric to clothing costs is not large, so the fabric price increases have some impact on enterprises, but not too big. Lou Ming, director of Zhejiang Reich Garment Co., Ltd. also told our reporter that the price of the fabric purchased by the company has increased, but it has not been much worse than before. Moreover, the company purchased the fabric in advance for a quarter, and now it still uses the stock of the fabric purchased in June.

It seems that it is a long process from the price of cotton raw materials to the fabric enterprises, and then to clothing manufacturers, and finally to the consumer market. Moreover, the price of raw materials is also fluctuating with the market. Since August 10th, the state has started throwing 600 thousand tons of cotton throwing and storing cotton, according to the daily dumping reserves of about 15 thousand tons, to remove holidays, the total throw can be carried out for about 2 months, the dumping will continue until the national day, catch up with the new cotton listing, the price will be further explored. {page_break}

Employee wages: this must go up.

According to the Ministry of labor and social security, in early February of this year, after the Jiangsu province took the lead in raising the minimum wage, China's wage surge gradually spread from the south to the inland provinces and cities. 14 provinces and municipalities such as Jiangsu, Zhejiang, Guangdong, Fujian, Tianjin, Shanxi and Shandong gradually raised the minimum wage standard, and the adjustment ranges above 10%. The average increase in Guangdong was 21.1%.

The nationwide wage increase has a direct impact on the labour intensive clothing industry. Chen Lingmei, chairman of Shenzhen winner Clothing Co., Ltd. introduced that the company recently increased 200 yuan per worker every month, and now the workers' monthly salary is basically over 2000 yuan, and they also need to eat and lodge. If they fail to achieve this level, it is difficult to retain skilled workers in Shenzhen.

According to XTEP's public report, the cost of XTEP employees increased from 81 million 318 thousand yuan in the same period last year to 95 million 345 thousand yuan in the first half of this year, an increase of 17.2% compared with the same period last year, while another listed company Anta reported that the direct wage expenditure in the first half of this year was 144 million 900 thousand yuan, an increase of 20.6% over the same period last year.

However, despite the high social appeal of pay increases, many enterprises seem to be very low-key, especially small and medium-sized garment enterprises. Zhejiang's Reich company has not responded positively to the topic of employees' pay increase. Fujian Dali company said there was an increase, but not very much. Only the Henan Zhengzhou Yali company, located in the central part, said that the remuneration of the employees was no longer lower than that of the coastal areas.

According to an industry analysis, domestic labor price rise is the trend of the times, but the salary increase of different industries, regions and enterprises of different sizes will not be synchronized. Generally speaking, the low end labor force is still oversupply, and the pay increase will not be great; the wage increase in the Midwest labor force will not be very obvious; a large number of small and medium enterprises will not be very optimistic about the wage increase. {page_break}

Advantage brand enterprise: this can rise.

Together with the cost of raw materials and the wages of employees, it is the large and medium-sized enterprises that have brand strength in the clothing arena.

The latest information released by apparel listed companies has proved this fact: XTEP's semi annual report shows that the average selling price of clothing products has increased by 13.9%; Anta reported that the price of clothing products increased by 7.1% to 49.6 yuan in the first half of this year; Li Ning Co also announced that in June this year, the retail price of clothing products increased by 17.9% in the fourth quarter of this year.

YOUNGOR also announced that the average price of new products increased by 15-16% this year, resulting in a sales increase of 4-5% in its clothing business, a sales increase of about 20%, and a gross profit of more than 50%.

As a famous brand of women's trousers, the company of Zhengzhou is not big. Zhao Sunli, chairman of the board, told reporters that the price of this year's women's trousers has been raised, because the company has been trying to improve its brand value. Therefore, even if the fabric price is not rising, the company will also raise its price. Zhao Sunli also believes that the impact of raw materials on consumers is not too big, because clothing is mainly "buy feeling", consumers will not be too sensitive to some price increases. Now the sales of 20-30% are growing at an annual rate.

Export oriented enterprises: this has risen.

Recently, the Chinese garment industry has been very refreshing. The export situation is excellent: knitted garments and knitted fabrics have maintained strong export growth in the first half of this year. Moreover, a signal worthy of great concern is the emergence of "volume and price increase": in 2010 1-6, China exported 23 billion 637 million dollars to the global export of knitted garments, an increase of 23.65% over the same period last year. In 2010 1-6, the average export price of knitted garments was US $2.52 / piece, an increase of 6.33% over the same period last year. Among them, the average price of wool knitted apparel in June was 5.96 dollars / piece, an increase of 27.08% over the same period last year.

This phenomenon has also been verified in domestic garment export enterprises. Wu Yunfeng, a Fujian Dali company, said that during the process of rising cost of raw materials and wages, the company had been trying to raise prices when negotiating with foreign clients. Of course, some of them had already signed orders. Wu Yunfeng remembered that when the cotton yarn was 24 thousand yuan per ton, he raised a little price to the customer, and raised a little price when he increased to 26 thousand yuan and 28 thousand yuan.

Another export garment company also admitted that their export quotations increased by about 10%. But while the price is rising, the profit of the products is decreasing.

Domestic small and medium enterprises: This is really not up.

Compared with export market, domestic brand enterprises are not raising prices, especially small and medium-sized enterprises.

Zhejiang Reich company clearly stated: "we will not raise the price, the price is almost the same as last year". Wu Yunfeng, general manager of Dali clothing company, said: "our company has a small number of domestic sales, and this part of the price in the second half of the year should not change much."

And for those small and medium sized processing enterprises whose brand is not well-known, especially those with no brand effect, their prices will not rise. This phenomenon is more obvious in the wholesale clothing market. A large number of clothes without brand and small brand clothing can only compress their profit margins, and can not see signs of price rise at all.