Supply And Demand Gap Causes Cotton Yarn To Go Strong Together

Last September to the end of June this year, cotton and yarn prices strengthened together, and textile enterprises, especially spinning enterprises, welcomed the good market situation which was difficult to meet in the past ten years.

The textile industry loves spring.

During the inspection process, the reporter found that with the increase of cotton prices, textile enterprises, especially spinning enterprises, benefited greatly from the 2010 cotton inspection teams.

As the middle reaches of the cotton spinning industry chain, the spinning enterprises have not reduced their profits because of the rising cost price, but they are out of the hot market with cotton.

Liu Zhong, vice president of Henan China Industrial (Group) Limited by Share Ltd, told reporters: "since last year, the market of textile enterprises has been very good. Over a period of time, enterprises have even taken the initiative to raise prices for cotton yarn, which has not been seen in the past 10 years, and belongs to an abnormal year."

According to industry sources, yarn prices have risen more than cotton prices. Some spinning enterprises have even made profits of 20%, which is equal to earning 10 years of money.

For the frantic yarn price, Liu Zhong reluctantly said: "we do not want to raise prices, but cotton prices are rising."

He stressed that 09-10 can only serve as a special case, not the normal state of the textile industry.

Liu Qing, an analyst at new lake futures, said that since the price of yarn has increased along with cotton prices since the beginning of the year, and the price of yarn has risen more than cotton prices, the sales profit margin of textile industry has reached a new high since 06 March, but downstream textile industry has achieved a new trend.

With the recovery of textile market demand in the lower reaches, the price of cotton yarn has risen sharply with the rise of cotton prices, and the listed companies related to cotton textile have also made brilliant achievements in the first half of this year.

In the first half of the year, Huafang textile realized sales revenue of 526 million yuan, gross profit margin reached 13.55%, and realized net profit of 33 million 270 thousand yuan, an increase of 301% over the same period last year.

Huafu color spinning (002042) completed sales revenue of 2 billion 289 million yuan in the first half of this year, an increase of 42.71% over the same period last year, achieving a net profit of 164 million yuan, an increase of 104.31% over the same period last year.

Supply and demand gap causes cotton yarn to go strong together

In the course of the inspection, we found that the owners of digital textile enterprises all expressed the feeling that "cotton in the spot market is hard to get". The inventory of enterprises is at a low level, and the contradiction between supply and demand is once again prominent.

Liu Zhong told reporters: "at present, the company's operating rate is 100%, the downstream is patency, product sales are faster, and finished product inventory is less than 10 days."

He further explained that last year, the international economic situation gradually warmed up, and the major retailers in the world concentrated on replenishment of stocks, pulling up the price of textile yarns and textile fabrics, and the rigid demand for such restocking still exists. The existing stock of major retailers is still not enough to produce 1/3 when they are booming.

Dong Shuzhi, director of the Jinshi Futures Research Institute, told reporters that "at present, cotton business inventories are very low, because the factors such as the decrease of cotton seed area, bad weather and consumption warming have led to the expansion of consumption gap, and a large number of annual inventory shifts have been digested."

Low inventory is difficult to meet the cotton demand of enterprises, and the expansion of enterprise demand has raised cotton prices. The rise of cotton prices has led to the rise of yarn prices. This is the reason why 09-10 cotton prices and yarn prices interact more strongly.

"Rare supply gap in recent years has driven domestic and foreign cotton prices in a typical bull market, which has led to a flourishing cotton trade and textile industry.

Because of the time effect of price pmission and the acceptance degree of the industrial chain to the price, the trade and textile industry in the upstream of the industrial chain benefit significantly from the current cotton bull market, while the downstream weaving and textile clothing industry is in the average level in recent years.

Analyst Liu Qing told reporters.

In the case of cotton prices and cotton yarn prices rising, in July, the relevant state departments began to warn the cotton prices which had gone up too fast, and conveyed the policy of dumping and storage to the market.

Under the influence of throwing storage, cotton yarn prices and cotton prices began to fall from July this year.

"From last September to the end of June this year, cotton and yarn prices have been rising. This is the best time for cotton spinning enterprises in 10 years. But with the fall in cotton prices, the good days that companies have lasted for more than half a year is coming to an end."

Ma Junkai, Deputy Secretary General of Dezhou Cotton Association of Shandong Province, said.

"Yarn prices have begun to drop since the national dumping and storage, and textile consumption has been in the off-season, and cotton prices and yarn prices have been loosened," Liu Zhong said. "But after the national dumping, the inventory reached a new low in the past year, and the reserve cotton is less than 1 months for the textile industry. This is also worth noting."

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Troubles in cotton spinning enterprises

For textile enterprises, the good market situation that is difficult to meet for ten years seems to be fleeting, and can not bring about sustained profit growth. However, many problems perplexing them have become increasingly prominent.

The high cost of labor, the purity of cotton and the strong psychology of farmers' reluctant to sell are the common problems encountered by many cotton spinning enterprises.

"We have already felt the pressure of recruiting people. Last year, the monthly salary for employees is 800 yuan, which is about 1200 yuan this year. And with the large number of large enterprises entering the local community, the turnover of employees is very large, and it is estimated that they will have to raise wages."

The head of a cotton spinning enterprise in Henan said.

The head of a cotton textile enterprise in Dezhou also told reporters that the cost of labor has increased nowadays, and most young people choose to go out to work, so it is difficult to recruit young workers.

Ma Junkai, a Shandong cotton textile group, told reporters about the "three fears" of cotton enterprises: "in cotton planting, it is not as good as planting grain for fear of planting cotton; in cotton purchasing and processing, cotton prices are not stable and high and low; on the spinning and weaving garments, they are afraid that the cotton fibers are high and all kinds of cotton flowers are mixed up."

A textile enterprise official said that the worry is not the high cotton price but the mixed grade.

"Farmers and cotton traders will sell low grade cotton to cotton spinning enterprises. Now cotton textile enterprises insist that they do not sell cotton to traders, that is, they are afraid of being sold back."

During the inspection process, many cotton textile business owners revealed worries about the reluctant sale of farmers.

Because of the decrease in domestic cotton area this year, farmers are likely to be reluctant to sell. It is reported that farmers' psychological price ranges from 4 yuan to 7 yuan, far higher than the expected purchase price of 3.8-4 yuan of cotton enterprises.

This contradiction is also a problem that must be faced and solved by cotton enterprises when new flowers start to weigh up.

In addition, the reporter also noted that cotton spinning enterprises, especially small and medium sized cotton spinning enterprises, are mostly reluctant to hedge with futures.

"When the market is good, there will be a shift between spot and futures. As an enterprise, it is natural to hope that both spot and futures will make money."

A cotton textile business owner in Dezhou spoke of the aspirations of most businesses.

In this regard, Huaan futures analyst Huang Chengbao said that the involvement of cotton enterprises is not high enthusiasm, mainly for futures understanding is not enough, will only use futures to speculate, and will not use it to avoid risks, for example, in the 08 years when the market crash, if made hedging, enterprises can reduce losses.