Industry Analysis: Who Is The Pain Of Wild Cotton?

　　 Cotton prices are crazy. This is the whole time. Textile and garment industry The most talked about topic.

Soaring data are in front of people. Domestic grade three cotton prices jumped from 12977 yuan / ton in the early 2009 to 25319 yuan / ton (up to October 22nd), up 95%.

According to the insiders, this height not only broke through the high point in 2003, but also hit a new high since 1995.

The frenzied cotton price is in cotton yarn, grey cloth, fabric, Garment manufacturing And other industrial chains have caused a chain reaction.

Lifting the "hoop curse" of raw materials with high added value

Hot money speculation is only a magnified demand, not a major factor in the rise in cotton prices.

　　 Imbalance between supply and demand Cotton prices rise

In the eyes of sun Huaibin, the high price of cotton is due to the imbalance between supply and demand.

From the perspective of demand, with the revival of domestic and foreign economy, the domestic and foreign demand market has seen a good momentum of development this year. According to the statistics of the General Administration of customs, clothing exports increased by 19% during the 1~8 months of this year, and exports of textile yarn, fabrics and products increased by 49 billion 510 million US dollars, an increase of 32.3% over the past 80 billion 290 million months. From the domestic demand market, data from the National Bureau of statistics show that retail sales of clothing, shoes and hats and needles and textiles were 400 billion yuan in 1~9 months, an increase of 24% over the same period last year. The demand for domestic and foreign markets has improved, and orders for textile and garment enterprises have picked up, driving the growth of cotton demand.

In addition, the introduction of relevant national policies, to a certain extent, restricted the speculation of capital for real estate, making domestic idle capital speculation, such as mung beans, cotton and so on. This is the entry of such social capital, thus stimulating demand rise.

"However, the speculation of idle funds is only a magnification of demand, not a major factor in the rise in cotton prices." Sun Huaibin reminded.

"From psychological factors, cotton prices have increased so that some enterprises can eat in order to increase reserves, so that they can be thrown out in a better market situation. This mentality has also led to a rise in cotton prices. Sun Huaibin said.

What are the factors of supply?

Sun Huaibin analysis, limited by the reduction of cotton sowing area and climate impact, the cotton production has been lower than last year, and the new cotton market has also pushed up the price of cotton. For the international market, the output and inventory of cotton are decreasing; and India, as a large cotton producing country, controls the export of cotton and reduces the supply of international cotton.

"The State Reserve threw 1 million tons of cotton, plus imported cotton, which can not effectively meet the symmetrical demand." Sun Huaibin adds.

What impact does the soaring cotton price bring to the textile and garment industry?

In this regard, sun Huaibin said that the rise in cotton prices led to the rise of cotton yarn, which made cotton textile enterprises earn more profits from cotton yarn. For example, 32% of the profits of 1~8 textile clothing industry came from the cotton textile industry. That is, the rise in cotton prices has not had a direct negative impact on the upstream industry.

However, the downward movement, such as weaving, printing and dyeing, clothing and so on, although all links have different price increases, but no cotton and cotton yarn is so high. "In other words, the cost transfer of raw materials is more difficult, because the lower the cost of raw materials, the lower the proportion of raw materials. Therefore, in the context of high raw material prices, the pace of enterprise differentiation may increase. Enterprises that have money to buy raw materials or make advance reserves can maintain them; on the contrary, they will be unhappy. "

Raising the added value is the fundamental way out.

Such a high cotton price will undoubtedly do more harm than good to the textile and garment industry. Therefore, the rational response of the industry is the core issue of the high cotton price.

Sun Huaibin pointed out that in terms of demand, there should be a rational choice for the investment in the cotton textile industry. We should not unilaterally emphasize the needs of the enterprises themselves. Otherwise, we will increase the expansion of capacity and virtually enlarge the demand for raw materials.

From the perspective of supply, sun Huaibin has also given relevant analysis.

First, increase planting area, but this possibility is not big. For many years, the contradiction between grain and cotton competition is more prominent.

The two is to increase unit output by scientific and technological input. Although the industry has been working hard, it is not easy.

The three is to increase reserves.

Four, in terms of imports, sun Huaibin hopes that the state can also be liberalized.

In addition, sun Huaibin made specific suggestions for the textile and garment industry. He believes that the industry should strengthen the development of alternative raw materials, that is, the key is to increase the number of non cotton fibers, super simulation fibers and super spinning cotton fibers, which is also a strategic task for the development of science and technology in the industry.

"In addition to increasing the development of alternative raw materials, there is another particularly important way to resist the rising prices of raw materials, that is, to increase the added value of products." At the same time, Sun Huaibin said that if the input of these raw materials, such as design, brand, channel and so on, can be added to the structure, so that the market can be recognized and sold at a good price, so that the cost of raw materials or other elements can be digested.

It is worth mentioning that in the eyes of sun Huaibin, circular economy is also a way to increase fiber. Specifically, cotton fiber products, including waste textiles and garments, can be reduced to fiber, reduced to cotton, reduced to polyester, and then recycled.

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Cotton production and price changes in some provinces in recent 5 years (328 index)

Cotton price rises steadily as cotton seeds rush higher.

Two rise, rising yarn prices drive cotton prices continue to rush

Three, global stocks fell to a low point and cotton prices hit a high point.

The domestic cotton price trend since 2009 can be roughly divided into five stages.

In the first stage, the seed cotton rush to promote lint prices steadily increased from September 1, 2009 to November 30th.

Due to the low temperature and rain in the main cotton producing areas such as Xinjiang, Shandong and Hebei in September 2009, cotton production in China is expected to increase substantially, and seed cotton purchase prices have risen sharply in October, giving enough impetus to domestic cotton prices continuing to rise at the end of 2009. By the end of the year, the cotton price of grade three rose to more than 14700 yuan, while the domestic cotton price reached 16000 yuan. At that time, cotton production in China was expected to be around 6 million 500 thousand tons, with a significant reduction of over 1 million 500 thousand tons.

The purchase price of seed cotton has climbed steadily in 2009, and the highest purchase price has reached 3.6 yuan / Jin, and the mainstream purchase price has reached 3.4 yuan / Jin. Judging from the price trend, cotton prices in the whole year have not declined significantly, indicating that the cotton industry has achieved good returns in 2009/2010.

In the second stage, policy adjustment and control will inhibit cotton prices rising too fast, from December 1, 2009 to February 28, 2010.

At the end of November 2009, the state decided to sell 500 thousand tons of state cotton reserves as a result of a big increase in cotton prices in early 2009. In December 22nd, the government issued 894 thousand tons of cotton import quotas within the tariff line ahead of schedule to increase market supply and curb cotton prices rising too fast.

Under the pressure of policy, fundamentals and regulation, domestic spot cotton prices remained stable during the period from December 2009 to February 2010, and the price of Zheng cotton was also reduced from 16600 yuan / ton to 15200 yuan / ton, close to spot price.

In the third stage, the rising price of yarn drives cotton prices to continue to rush through, from March 1, 2010 to June 30th.

After the Spring Festival, after the strong recovery of the global economy and the expected failure of China's interest rate hike, enterprises involved in all aspects of cotton industry began to replenish the inventory lowered due to the financial crisis. Meanwhile, domestic demand grew significantly under the stimulus of the policy, and exports continued to improve. Domestic yarn prices began to rise sharply after the Spring Festival and drove cotton prices up.

Although the government issued a document that banned speculation capital speculation and named cotton in May, there was no substantive policy for fast rising cotton prices. Cotton prices continued to rise under the support of strong consumption, and the increase in operating costs and textile enterprises started to increase domestic cotton prices. As of the end of 6, the 328 spot spot cotton price exceeded 18000 yuan / ton mark, while Zheng cotton's September contract also reached 18000 yuan / ton.

In the fourth stage, demand in the off-season has been temporarily weakened, and cotton prices have entered the adjustment pattern, from July 1, 2010 to August 30th.

In July, the textile market entered a slow off-season. At the same time, as the RMB reopened in June 19th, export pressure increased and downstream demand weakened. Because the textile enterprises are sitting on high profits, textile enterprises began to sell cotton yarn and cotton yarn into a downward trend. Affected by this, spot cotton prices also showed signs of decline.

Since August 10th, the state has started to throw 600 thousand tons of reserves and 400 thousand tons of additional reserves in September 26th. This made the market resources adequate and demand weakened in the end of 2009, and cotton prices entered a weak pattern. But overall, the adjustment is not large.

The fifth stage is global inventory falling to a low level, and cotton prices hit a record high of 25 thousand, from September 1st to date.

A total of 1 million tons of state reserve cotton has been sold out in 20 in October. Under the influence of supply and demand and bullish psychology, futures, electronic matching, dumping and spot prices have risen sharply. At present, the national dumping price has risen to above 24 thousand, and spot grade three cotton price has broken through 22000 yuan, and New York futures price has also broken through 1 yuan mark, reaching the highest level in nearly 15 years.

The number of cotton enterprises started to increase gradually, and the purchase price of seed cotton was significantly higher than that of previous years. The price of the seed cotton has already appeared, and the price has increased from 3.9 yuan to 5 yuan per kilo. According to this calculation, the cost of lint processing exceeds 21500 yuan / ton.

Since the beginning of the new cotton year (as of September 28th), the purchase price of seed cotton is higher than 60% of the same period last year, and the factory price of lint is nearly 70% higher than that of the same period last year.

High cotton prices will become "normal"

Cotton production in the first half of the year has become the main factor to drive the market up; strong consumption in the second half of this year has become a new driving force for the rise in cotton prices.

The sharp rise has become the main keynote of cotton prices at home and abroad in recent two years. The reasons include the following aspects:

First, global cotton production has continued to decline, and consumer demand has recovered more than expected. Cotton is an underrated product all over the world. The yield of wheat is lower than that of wheat, corn and soybean, resulting in a sharp decline in cotton planting area and a sharp drop in output. After the financial crisis in 2008, the global economic recovery was strong, and the recovery of the global cotton consumption market exceeded the market expectations. Under the influence of the above two aspects, the contradiction between supply and demand of cotton is more and more prominent. USDA data show that in 2009 -2010, cotton consumption in the world exceeded 15 percentage points of output.

Two, there is a history of "bright sunshine" in the downstream cotton mills. Starting from March this year, the profits of the cotton mill began to soar, and some of the textile enterprises were hoarding large quantities of stocks at a low price at the beginning of the year, and their profits increased significantly. In June, the cotton mill's theoretical profit reached 4600 yuan / ton, and its profit rate reached over 19%. Then a slight fall, but the textile enterprise theoretical profit still reached 3000 yuan / ton. The price of yarns is strong, which ensures that there is still room for profit for textile mills to purchase raw materials at high prices.

The three is that the stock is too low to become the fuse of cotton price rise. By the end of 8 this year, enterprises accounted for less than 200 tons, accounting for 58%; 200~1000 tons of enterprises accounted for 22%; 1000~2000 tons accounted for 10%; inventory of 2000~3000 tons accounted for 6%; and 4% of enterprises' stocks were 3000 tons. Although the total inventory of cotton is larger, the actual stock of each manufacturer is not optimistic, and the enterprises with less than 200 tons occupy the majority, while the enterprises with less than 1000 tons of stock occupy 80%.

Four, there is a pattern of mutual promotion between cotton and national cotton. Long term supply of cotton in China is short of demand, and 25%~30% is supplemented by imports. Last year, domestic cotton output was 6 million 400 thousand tons, while consumption was more than 10 million tons. The gap was only offset by imports. So the international cotton price is a very important index for China, and the change of domestic import demand will have a great impact on the international cotton price. Recently, the price of cotton to China's main port is generally around 120 cents, and the domestic delivery price has been close to 22 thousand yuan.

The five is the resumption of growth in China's textile industry, which will bring solid support to the cotton market. Data show that from 1 to August, China's textile and clothing exports increased by 23.75% over the same period last year, and have fully recovered to the level before the crisis. Textile production has also maintained rapid growth, with the growth rate of yarn, cloth and clothing reaching the highest level in recent years.

Despite the financial boost, there was no obvious sign of hype in the cotton market in 2009~2010, and the law of supply and demand still dominated the market. Cotton production in the first half of this year has become the main factor to drive the market up, and has promoted cotton prices to rise substantially. In the second half of this year, strong consumption has become a new driving force for the rise of cotton prices. At present, the cotton price is a reflection of normal supply and demand. The bull market pattern is unquestionable. It is difficult to completely change the pattern of tight cotton production in the new year.

It can be preliminarily judged that the "low cotton price era" will never return, and the "high cotton price era" in the cotton market has arrived.

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Garment manufacturers "clamped down"

Soaring cotton prices have made domestic garment manufacturers feel sorry for ever.

In the middle part of the industrial chain, the garment manufacturing enterprises have been caught in an embarrassing situation of "two faced pressures" in the cotton price storm. On the one hand, the upward pressure on the fabric price is constantly and can not be evaded. On the other hand, in the face of strong brands, their bargaining power is limited by ten points.

In fact, the profits of garment manufacturers are not very rich. In recent years, with the increasing cost of raw materials and labor, and the pressure of RMB appreciation, the pressure on enterprises to survive is enormous. The crazy rise in cotton prices is more like a fatal blow, causing many garment manufacturers to fall into business difficulties.

Cost pressures are unprecedented and enterprises are struggling.

The direct impact of rising cotton prices on enterprises is the rapid rise in costs and the decline in profits. "In the clothing industry for 20 years, this year is the most stressful year. Conservative estimates, this year's profits should be less than half. " Zhu Danying, general manager of Dalian Huaying Garments Co., Ltd., which is engaged in export order production, has expressed frustration in his mind.

Liu Bisheng, chairman of Foshan Anthony Knitting Co., Ltd. used a word to describe the current situation of enterprises - "bitter". He admitted that the rise in cotton prices has made their company at a critical point of not making money and losing money. If cotton prices continue to rise, they will surely lose money.

Because clothing manufacturers usually arrange production and purchase raw materials after receiving orders, they will not hoard too many fabrics in advance. Therefore, the rise of fabric price brought by the rise in cotton prices will be firmly pressed into manufacturing enterprises. In the period when cotton prices are rising frequently, manufacturing enterprises must purchase fabrics in a timely manner after receiving orders.

Cai Jinhui, manager of Fujian PST Garments Co., Ltd., said that the price of cotton yarn per day was a great confusion to the production enterprises. In the course of the interview, he immediately asked a large domestic cotton spinning and dyeing enterprise to make inquiries about the latest price of cotton yarn. The other side quoted that the price per kilogram of cotton yarn has increased by 5 yuan over the previous few days.

"Customer orders, we have to order yarn immediately, cash to put up raw materials, otherwise it will rise again. This ensures the stability of the order cost, but the pressure of the funds is too great. Cai Jinhui sighed.

It is understood that in the overall cost of garment processing enterprises, the cost of raw materials based on fabric accounts for about 70% of the total cost. In other words, the cost of cotton based garment manufacturing enterprises has increased rapidly in the past 70% years. Besides the cotton yarn, the price of polyester, acrylic and other synthetic fiber fabrics has also risen to varying degrees. In addition, the rising cost of labor has brought great pressure to enterprises.

"Before, a worker's salary was less than two thousand yuan, and now the average wage is more than 2600." Liu Bisheng said that the rising cost of labor is also a great pressure on the processing enterprises, which accounts for about 15% of the total cost.

Zhu Danying, general manager of Dalian Huaying Garments Co. Ltd., seems to say that the rise in labor costs is even greater than the rise in cotton prices. Because the rise in cotton prices may only be a problem for some time, and the rise in wages is a long-term problem.

The upward pressure on upstream prices is continuing downward, but garment processing enterprises can not continue to convey this pressure to downstream brands and buyers.

Zhu Danying, general manager of Dalian Huaying Garments Co., Ltd., said that the products of their company were mainly exported to Japan, and the price range that buyers could accept was very limited. For example, the use of low-grade fabric clothing, the upstream fabric price increase of 10%, clothing prices can only rise by about 3%; the use of high-grade fabric clothing slightly better, the price increase can reach about 5%.

According to Liu Bisheng, chairman of Foshan Anthony Knitting Co. Ltd., it is also difficult for them to raise prices to downstream brands. For example, the price of 112 yuan mercerized cotton T-shirt last year, the same grade clothing this year will be able to raise the price to about 120 yuan, or far less than the increase of raw materials.

In Liu Bisheng's view, in the cotton price rise, garment processing enterprises are the most passive part, and also the biggest hit. "On the one hand, the upstream fabric enterprises will pass the upward pressure and can not be avoided; on the other hand, brand enterprises will not bear more cost pressures. We became a layer of cracks. No way, bargaining power is too low, this is the commercial game. Liu Bisheng sighed.

Cai Jinhui, the business manager of Fujian pusst Garments Co., Ltd. also admitted that the order of Brand Company in China was due to long-term cooperative relations of friendship and mutual assistance. When the raw materials were rising, Brand Company would consider accepting the request for adjusting the price of clothing products as appropriate, but the price increase from abroad would be more difficult.

Under such pressure, garment manufacturers are struggling. Some small processing enterprises can only close their businesses when they are not profitable.

According to Zhu Danying estimates, about 1/3 of the small businesses in Dalian are closed down. In the past years, they received some orders from abroad, and they should be partly allocated to local small businesses. But this year, there are not many small businesses to pick up their orders.

"After all, small businesses have a lower risk tolerance capability. If they can't make money, they will close down or switch to other industries. Companies like ours can still persist, but if costs continue to rise, it will be difficult to sustain them. " Zhu Danying said.

According to Liu Bisheng, there are also some small garment factories in Guangdong.

Contrary to the increasing pressure of business, business is exceptionally good.

"During this time, many lists came to us. But because of the difficulty of raising prices, we dare not answer more. Liu Bisheng said, "now is not how to make money, if the cost is still going up, in the end, if you don't talk about it for a year, you may lose money, so you can only pick up the list of old customers selectively."

Zhu Danying also said that although the order is relatively easy now, but because of cost pressures, they are also cautious about taking orders. It is estimated that there will be a big decrease in the annual order volume.

countermeasure

Many initiatives to solve cost pressures

In view of the current craziness of cotton prices and other raw materials, enterprises have taken some measures to deal with it.

First, integrating clothing and textile materials, it is suggested that customers should not use cotton ingredients or reduce the content of cotton ingredients, or use viscose and other more stable textile materials to achieve relatively stable production and operation conditions.

Second, the use of high-grade cotton yarn to enhance the added value of cotton products, to avoid or reduce the obvious impact of rising cotton prices.

Thirdly, we should use a large amount of capital to store reasonable supplies.

Fourthly, cotton yarn raw materials can be imported through many channels. In addition to large factories, yarn can also be used to make up the difference and capital pressure from small factories.

Fifthly, improve the technological content of products, enhance the level of production management, strengthen the management of orders, take into account the factors affecting the price of materials, and further control the impact of raw materials.

Improving the added value is fundamental.

The added value is not only a brand enterprise, but also the processing enterprise can pursue additional value.

Amid the rising cotton prices, many garment manufacturers have fully realized that only by continuously upgrading their brand value, can they enhance their bargaining power and enhance their ability to resist risks.

Zhu Danying, general manager of Dalian Huaying Garments Co., Ltd., said that for a long time, "made in China" has become a sign of "low price". Now is the time to break this idea.

　　 Jiang Hengjie, consultant of China clothing association, thinks that the rise of cotton price has brought great pains to the entire garment industry, but it is not necessarily a bad thing, because it will force enterprises to innovate, improve production efficiency and enhance brand value.