China'S Fragile Cotton Industry Chain

Crazy cotton prices

In 2010 1~6, China's cotton market staged an unprecedented price surge.

Take the main production and marketing area in Yancheng, Jiangsu as an example, after the Spring Festival, the price of the 429 grade lint to the factory price is about 14500 yuan / ton, and by the end of June, the 429 lint price in Dafeng and Sheyang has gone over 18000 yuan / ton, up 3500 yuan / ton, and the resources are tight.

Such a surge has made many people in the industry unprepared.

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China's cotton market this year (2009/2010) has the following 4 characteristics.

First, the gap between production and demand is 5 million 200 thousand tons, and the gap rate is around 45%.

The annual cotton output of 2003/2004 was 4 million 860 thousand tons, and the gap was about 1 million 390 thousand tons compared with the consumption demand of 6 million 250 thousand tons in the year, and the gap of production and demand was 22.2%, which caused the cotton price to rise sharply.

As the late expansion of cotton imports (the import of 1 million 979 thousand tons in that year), supply and demand gradually balanced, cotton prices began to decline after May.

Cotton production in this year is 6 million 400 thousand tons (statistical bulletin data), a decrease of 1 million 100 thousand tons over the previous year, a decrease of 14.7%. It is estimated that consumption will be 11 million 600 thousand ~1190 million tons in the whole year, and the gap between production and demand will be more than 5 million 200 thousand tons, and the gap rate will reach 45%.

Second, cotton imports dropped by 2008/2009 million tons in recent years, and the gap was pferred to this year.

In 2008/2009, cotton production in China was 7 million 500 thousand tons, which was basically the same as that in 2007/2008; imports of 1 million 446 thousand tons, a decrease of 40.7% million tons compared with that of 2007/2008; after calculation, the consumption of spinning cotton resources is about 10 million 860 thousand tons, and the resource gap is about 1 million 900 thousand tons.

Because of the sharp decline in cotton imports in the year, the gap was partly pferred to 2009/2010, resulting in intensified resource tension this year.

Third, as of May 2010, China's cotton consumption exceeded 900 thousand tons, and resources were scarce.

According to the statistics of National Bureau of statistics, as of May 2010, the total output of yarn was 19 million 200 thousand tons. According to the estimate, 9 million 200 thousand tons of cotton had been consumed, although the total annual import volume was 1 million 919 thousand tons, an increase of 85% over the previous year, which is 32.7% higher than that of the previous year. However, it is still difficult to make up for the shortfall.

Fourth, 3 months after 2009/2010, cotton spinning needs 2 million 400 thousand to 2 million 700 thousand tons, and resources are nowhere to be found.

According to the average monthly consumption of 800 thousand to 900 thousand tons, 3 months after this year, 2 million 400 thousand to 2 million 700 thousand tons of cotton should be spun.

Although the import quota of 800 thousand tons of cotton was issued by management in May, it was far from enough.

To sum up, cotton production has decreased, demand has increased, cotton yarn has been rising and support has been increased, and cotton merchants' hoarding, idle capital speculation and international cotton market cooperation have led to a surge in cotton prices and a record high since the beginning of this year.

Spot cotton prices exceeded 17800 yuan / ton, exceeding the highest level in 2003/2004.

Futures markets are trading actively, and turnover and warehouse receipts doubled. Cotton prices have also set a new record.

At the same time, cotton prices in the international market were affected by China's cotton production, supply and demand gap, India's control of cotton exports and the EU debt crisis, and the appreciation of the US dollar. In February, the international cotton price surged more than 1200 points, pushing the international cotton price to a historical high.

It can be said that the reduction of available resources has provided a primary stimulus to the rise in cotton prices.

As the raw material of the textile industry, domestic cotton 95% is used for spinning, cotton from seed cotton, lint to yarn, and finally weaving, printing, dyeing, finished products and export. It has a wide chain of upstream and downstream industries. At present, the price of raw materials is continuously flowing downstream.

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The downstream industry chain of anxiety

As the cost of raw materials such as cotton and cotton yarn has risen sharply, textile enterprises and garment processing industry as the downstream industry chain are increasingly feeling the pressure of rising costs.

The latest research report released by the China Cotton Association shows that the price of raw cotton material continues to rise, and the profits of downstream garment enterprises are reduced. Many weaving enterprises choose to stop working and leave, while clothing companies are more cautious when receiving orders.

Fortunately, the price of cotton yarn increased faster than cotton in 2010, and the sales situation was better.

But the lack of cotton resources, the lack of channels for procurement, and the lack of resources have become the most worrying worries of textile enterprises.

It is understood that some enterprises to complete the order, looking for cotton everywhere, and even at 2000 yuan per ton to buy Cotton quotas in the market.

According to some enterprises, because cotton prices and cotton yarn prices in 2010 changed too fast, they could not organize the production and operation of enterprises.

In order to meet their own production needs, some cotton spinning enterprises consider purchasing the 200 type cotton processing enterprises, so that they can acquire, process and produce one-stop products.

Conditional enterprises should consider directly signing production and sale agreements with cotton growers and take the road of integration of agriculture and industry.

Some needles and cotton enterprises are also considering building their own textile factories to meet their own demand for yarn.

Compared with large enterprises, the impact of higher raw material prices on small and medium-sized enterprises is bigger. Some enterprises have to give up orders and compress production.

On the one hand, the order can not be avoided, after all, to maintain the operation of the enterprise and the expenses of the workers, can not stop work; on the other hand, the rising price of raw materials, and the increase of labor cost, the profit space of the enterprise is becoming smaller and smaller, and even the possibility of losing money.

At present, enterprises can only reduce the scale of production and no longer blindly take orders.

However, the rise in raw material prices will lead to a substantial increase in costs, but some customers will not accept the increase in the prices of their products. The increased costs can only be digested by the enterprises themselves.

In view of the current market situation of textile and garment industry, the cost pressure driven by the rapid rise of cotton prices has been pferred to yarn, cloth, clothing production and other links.

Difficult market regulation

In the case of only 1 million 500 thousand tons of cotton reserves in the country, although 600 thousand tons have been approved for dumping, 600 thousand tons are only one month's demand for the market, and the ability to control the market is limited.

Since June 2010, after the policy was issued, the market was worried about the state's regulation and control of cotton. Therefore, cotton futures fell down and adjusted, but with the gradual digestion of information and high spin profits, cotton demand was strong, cotton spot prices continued to rise, cotton futures prices gradually stabilized and picked up, and the strength remained strong.

The complexity of the cotton market is unforeseen. It also highlights the lag and inefficiency of the macro-control measures.

As early as the first wave of cotton prices surged in 10~11 months in 2009, the state actively adopted measures to throw cotton into the cotton basket to curb cotton prices, and issued cotton import quotas ahead of time in December to enhance confidence in stabilizing the cotton market this year.

However, in the course of several successive wave of soaring prices, especially after March 2010, when the venture capital intervened in speculation, cotton merchants sold hoarding cotton and textile enterprises were extremely difficult to purchase cotton, measures to curb the soaring cotton prices were not yet introduced, which led to the increasingly complicated cotton market and unable to accurately predict and predict the future market.

The China Cotton Association's investigation report also pointed out that because the policy was hanging on the market, the market gradually digested the bad news, and the market and price of the downstream yarn changed little, further supporting the cotton price.

The rise of cotton prices will eventually spread to the terminal of the industrial chain, and it will still have to be paid by cotton farmers and terminal consumers.

In order to stabilize the cotton market and meet the production demand of the enterprises, the state should introduce macro-control measures in time. If the resources are not sufficient, the import quota should be given more or even the quota system should be abolished, so that the enterprises can choose to purchase cotton in the international market. This is one of the most effective measures to stabilize the market at present.