Industry Analysis: Who Is The Pain Of Crazy Cotton?

　　 The price of cotton is crazy. In recent years Textile and clothing industry The topic that is most concerned and discussed.

The soaring data is in front of people. The domestic tertiary cotton price jumped from 12977 yuan/ton in early 2009 to 25319 yuan/ton (as of October 22), up 95%.

Industry insiders judged that this level not only broke through the high point in 2003, but also created a new historical high since 1995.

Crazy cotton prices, such as cotton yarn, grey cloth, fabric Clothing manufacturing And other industrial chains

Relieve the "Hoop Curse" of raw materials with high added value

Hot money speculation only magnified demand, not the main factor in the rise of cotton prices

　　 Imbalance between supply and demand Cause the cotton price to rise sharply

In Sun Huaibin's view, the overall reason for the high cotton price is the imbalance between supply and demand.

In terms of demand, with the recovery of domestic and foreign economies, the domestic and foreign demand markets have shown a good momentum of development this year. According to the statistics of the General Administration of Customs, clothing exports from January to August this year reached US $80.29 billion, up 19%; The export of textile yarns, fabrics and products reached 49.51 billion US dollars, up 32.3%. From the perspective of the domestic demand market, the data of the National Bureau of Statistics shows that from January to September, the retail sales of clothing, shoes and hats, needles and textiles in China reached 400 billion yuan, up 24.0% year on year. The improvement of domestic and foreign demand market and the recovery of textile and clothing enterprises' orders have driven the growth of cotton demand.

In addition, the introduction of relevant national policies, to a certain extent, has restricted the speculation of capital on real estate, making domestic hot money turn to speculation in real objects, such as mung beans, cotton, etc. It is this kind of social capital that has driven the increase in demand.

"However, the speculation of hot money only magnified demand, not the main factor in the rise of cotton prices." Sun Huaibin reminded.

"In terms of psychological factors, the rise in cotton prices has led some enterprises to increase their reserves and eat in large quantities so that they can sell out in a better market. This mentality has also led to the rise in cotton prices," Sun Huaibin said.

What are the supply factors?

According to Sun Huaibin's analysis, due to the reduction of cotton planting area and the impact of climate, the cotton output has decreased compared with that of last year. In addition, the delayed listing of new cotton has also pushed up the price of cotton. For the international market, cotton production and inventory are declining; India, as a large cotton producing country, controls cotton exports and reduces the supply of international cotton.

"The state reserve has thrown away 1 million tons of cotton, plus imported cotton, which still cannot effectively balance demand," Sun Huaibin added.

How does the soaring cotton price affect the textile and clothing industry?

In this regard, Sun Huaibin said that the rise of cotton prices has driven the rise of cotton yarn, which makes cotton textile enterprises earn more profits from cotton yarn. For example, 32% of the profits in the textile industry from January to August came from the cotton textile industry. That is, the rise in cotton prices has not yet brought a direct negative impact on the upstream industry.

However, even though the prices of weaving, printing and dyeing, clothing, etc. have been raised to varying degrees, they are not as high as cotton and cotton yarn. "In other words, it is difficult to transfer the cost of raw materials, because the lower the cost of raw materials is, the lower the proportion of raw materials in the cost. Therefore, in the context of high prices of raw materials, the speed of enterprise differentiation may increase. Enterprises with money to buy raw materials or make reserves in advance can maintain; on the contrary, life is more difficult."

Increasing added value is the fundamental way out

Such a high cotton price will undoubtedly do more harm than good to the textile and clothing industry. Therefore, the industry's rational and practical response is the core issue behind the "high cotton price".

Sun Huaibin pointed out that in terms of demand, the investment in the cotton textile industry should be rational, and the demand of enterprises should not be unilaterally emphasized; Otherwise, the expansion of production capacity will be increased, and the demand for raw materials will be increased invisibly.

From the perspective of supply, Sun Huaibin also gave a correlation analysis.

First, increase the planting area, but this is unlikely. For many years, the contradiction between grain and cotton for land has been more prominent.

Second, increasing unit output depends on scientific and technological investment. Although the industry has been working hard, it is not easy.

Third, increase reserves.

Fourth, in terms of imports, Sun Huaibin hopes that the country can also open up.

In addition, Sun Huaibin made suggestions especially for the textile and clothing industry. He believes that the industry should strengthen the development of alternative raw materials, that is, the key is to increase some non cotton fibers, super artificial fibers, and super spun cotton fibers, which is also a strategic task of the industry's scientific and technological development.

"In addition to increasing the development of alternative raw materials, there is a particularly important way to resist the rise in the price of raw materials, that is, to improve the added value of products." Sun Huaibin also said that if we can use inputs other than design, brand, channel and other raw materials to form the structure of added value, so as to gain market recognition and sell at a good price, In this way, the cost of raw materials or other factors can be digested.

It is worth mentioning that, in Sun Huaibin's view, circular economy is also a way to increase fiber. Specifically, it refers to how to restore cotton fiber products, including waste textiles and clothing, to fiber, cotton and polyester, and then recycle them.

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Changes of cotton output and price in some domestic provinces in recent five years (328 index)

As soon as the price rises, the seed cotton soars, pushing the lint price up steadily

Second increase, cotton prices continue to go through customs due to the rising yarn price

Three rises, global inventory fell to the bottom, and cotton prices hit the high point

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

In the first stage, the high seed cotton pushed the lint price up steadily from September 1 to November 30, 2009.

Due to the low temperature and rainy weather in Xinjiang, Shandong, Hebei and other major cotton producing areas in September 2009, China's cotton production is expected to decrease significantly. The purchase price of seed cotton rose sharply in October, giving sufficient impetus to the continuous rise of domestic cotton prices at the end of 2009. By the end of the year, the tertiary cotton price had risen to more than 14700 yuan, while the domestic Zheng cotton price had broken through the 16000 yuan threshold. At this time, China's cotton output was expected to be about 6.5 million tons, with a significant reduction of more than 1.5 million tons.

In 2009, the purchase price of seed cotton rose steadily, with the highest purchase price reaching 3.6 yuan/jin and the mainstream purchase price reaching about 3.4 yuan/jin. From the perspective of price trend, the cotton price did not decline significantly in the whole year, which indicates that the cotton industry has made good gains in 2009/2010.

In the second stage, the policy regulation restrained the excessively fast rising cotton price from December 1, 2009 to February 28, 2010.

Due to the large increase in cotton prices at the beginning of 2009, the state decided to sell 500000 tons of national stored cotton at the end of November 2009. On December 22, the government issued an import quota of 894000 tons of tariff cotton in advance to increase market supply and curb the rising cotton price.

Under the pressure of policies, fundamentals and regulation, the domestic spot cotton price maintained a stable pattern from December 2009 to February 2010, and Zheng cotton price also fell from a high point of 16600 yuan/ton to about 15200 yuan/ton, close to the spot price.

In the third stage, the cotton price continued to clear the customs due to the rising yarn price, which lasted from March 1 to June 30, 2010.

After the Spring Festival, affected by the strong recovery of the global economy and the failure of the expectation of China's interest rate increase, enterprises involved in all aspects of cotton began to supplement the inventory reduced due to the financial crisis. At the same time, domestic demand increased significantly under the policy stimulus, and exports continued to improve. Domestic yarn prices began to rise sharply after the Spring Festival, which led to the rise of cotton prices.

Although the government issued a document prohibiting speculative funds from speculating on commodities and named cotton in May, there was no substantive policy issued against the rapidly rising cotton price. The cotton price continued to rise under the support of strong consumption, and the domestic cotton price rose significantly due to the large increase in enterprise replenishment and the operating rate of textile enterprises. By the end of June, 328 spot cotton prices had broken through the 18000 yuan/ton threshold, while Zheng Mian's contract in September also reached more than 18000 yuan/ton.

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

In July, the textile market entered a late slack season. At the same time, due to the resumption of foreign exchange reform of RMB on June 19, export pressure increased and downstream demand weakened. Because textile enterprises enjoy high profits, textile enterprises began to sell cotton yarn at the margin, and cotton yarn entered a downward trend. Affected by this, spot cotton prices also showed signs of falling.

The state began dumping 600000 tons on August 10 and added 400000 tons on September 26. This made the market resources sufficient at the end of 2009, the demand weakened, and the cotton price entered a weak situation. On the whole, however, the adjustment is not significant.

The fifth stage is when the global inventory fell to a low point, and the cotton price hit a historical high of 25000 from September 1 to now.

The accumulated 1 million tons of national reserve cotton also sold out on October 20. Affected by the supply and demand relationship and bullish psychology, futures, electronic matchmaking, stock selling and spot prices rose significantly. At present, the national bid price for stock selling has risen to more than 24000 yuan, the overall spot three-tier cotton price has exceeded 22000 yuan, and the futures price in New York has also exceeded the US $1 mark, reaching the highest level in nearly 15 years.

The number of cotton enterprises in various regions is gradually increasing, and the purchase price of seed cotton is significantly higher than in previous years. Rush buying has emerged, and the price has gradually increased from 3.9 yuan/kg to more than 5 yuan/kg. According to this calculation, the lint processing cost exceeds 21500 yuan/ton.

Since the beginning of the new cotton year (as of September 28), the purchase price of seed cotton is more than 60% higher than that 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"

The reduction of cotton production in the first half of the year became the mainstream factor driving the market up; The strong consumption in the second half of the year became the new driving force for the rise of cotton prices.

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

First, global cotton production continued to decline, and consumer demand recovered more than expected. Cotton is an undervalued product in the world. Compared with wheat, corn and soybeans, the yield of cotton is relatively low. As a result, the planting area of cotton in the whole world has declined significantly, and the output has also declined significantly. In addition, the adverse weather has worsened the situation. After the 2008 financial crisis, the global economy recovered strongly, stimulating the recovery of the global cotton consumption market far faster than the market expected. Under the influence of the above two aspects, the contradiction between cotton supply and demand is becoming increasingly prominent. USDA data shows that from 2009 to 2010, the global cotton consumption exceeded the output by 15 percentage points.

Second, it is difficult to see "sunny" market in downstream cotton mills in history. Since March this year, the profits of cotton mills have soared, while some textile enterprises have accumulated a large amount of inventory at the beginning of the year when prices were low, resulting in a sharp increase in profits. In June, the theoretical profit of the yarn mill reached 4600 yuan/ton, with a profit margin of more than 19%. Later, it fell slightly, but the theoretical profit of textile enterprises still reached about 3000 yuan/ton. The firm price of yarn ensures that there is still profit space for textile mills to purchase raw materials at a high level.

Third, the low inventory caused the rise of cotton prices. By the end of August this year, 58% of enterprises with inventory below 200 tons; Enterprises with 200-1000 tons account for 22%; Enterprises with 1000~2000 tons account for 10%; 6% of enterprises with 2000~3000 tons of inventory; Another 4% of enterprises have 3000 tons of inventory. Although the overall inventory of cotton is large, the actual inventory of each manufacturer is not optimistic. Enterprises with less than 200 tons account for more than half, and enterprises with less than 1000 tons account for 80%.

Fourth, foreign cotton and domestic cotton form a pattern of mutual promotion. China's cotton supply has been in short supply for a long time, with 25%~30% being supplemented by imports. Last year, the domestic cotton output was 6.4 million tons, while the consumption was more than 10 million tons. The gap was only made up by imports. Therefore, the international cotton price is a very important indicator for China, and changes in domestic import demand will have a huge impact on the international cotton price. Recently, the quotation of foreign cotton to China's main port is generally around 120 cents, which is close to 22000 yuan when converted into domestic picking price.

Fifthly, the restorative growth of China's textile industry has brought solid support to the cotton market. The data shows that from January to August, China's textile and clothing exports increased by 23.75% year on year, which has completely recovered to the level before the crisis; The production of textile industry also continues to maintain rapid growth, among which the growth rate of yarn, cloth and clothing production has reached the highest level in recent years.

Although there are funds to fuel the flames, the cotton market from 2009 to 2010 shows no obvious signs of speculation, and the law of supply and demand still dominates the market. The reduction of cotton production in the first half of this year has become the mainstream factor driving the market up and driving the cotton price up significantly; The strong consumption in the second half of the year became the new driving force for the rise of cotton prices. The current cotton price is a reflection of the normal supply and demand relationship, and the market bull market pattern is unquestionable. It is difficult to completely change the pattern of tight cotton output in the new year.

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

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Clothing manufacturers that have been "flattened"

Soaring cotton prices have made domestic garment manufacturers feel unprecedented sadness.

Garment manufacturing enterprises in the middle of the industrial chain are caught in the embarrassing situation of "double pressure" in the cotton price crisis: on the one hand, the pressure of rising prices of upstream fabrics is constant, which cannot be avoided; On the other hand, facing strong brand merchants, their bargaining power is very limited.

In fact, the profits of garment manufacturing enterprises are not very rich. In recent years, under the influence of factors such as the rising cost of raw materials and labor as well as the pressure of RMB appreciation, the survival pressure of enterprises is enormous. This crazy rise in cotton prices is more like a fatal blow, which has plunged many garment manufacturing enterprises into operating difficulties.

Unprecedented cost pressure Enterprises are struggling

The direct impact of rising cotton prices on enterprises is that costs rise rapidly and profits decline. "After more than 20 years of struggling in the clothing industry, this year is the most stressful year. It is conservatively estimated that this year's profit will also be less than half." Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., which is engaged in export order production, expressed his depression.

Liu Bisheng, chairman of Foshan Antony Knitting Co., Ltd., used one word to describe the current situation of the enterprise - "bitter". He said frankly that the rise in cotton prices has put their company at the critical point of not making money and losing money. If cotton prices continue to rise, they will definitely lose money.

As garment manufacturing enterprises generally arrange production and purchase raw materials after receiving orders, they will not hoard too many fabrics in advance, so the rise in fabric prices caused by the rise in cotton prices will really weigh on the manufacturing enterprises. In the period of frequent cotton price increases, manufacturers must purchase fabrics in a timely manner after receiving orders, otherwise they may have to bear the loss caused by price changes.

Cai Jinhui, business manager of Fujian PST Clothing Co., Ltd., said that cotton yarn is priced one day, which has really brought great confusion to the production enterprises. In the process of the interview, he immediately called a large cotton color spinning enterprise in China to ask about the latest price of cotton yarn. The other party quoted that each kilogram of cotton yarn has increased by 5 yuan over the previous days.

"When a customer orders, we have to order yarn immediately, and put forward the raw materials in cash, otherwise it will rise again. This can ensure the stability of the order cost, but the pressure of funds is too great." Cai Jinhui sighed.

It is understood that in the total cost of garment processing enterprises, the cost of raw materials dominated by fabrics accounts for about 70%. In other words, 70% of the cost of cotton based garment manufacturing enterprises has risen rapidly in the past year. In addition to cotton yarn, the price of polyester, acrylic and other chemical fiber fabrics is also rising to varying degrees. In addition, the rising labor costs have also brought considerable pressure to enterprises.

"Before, a worker's salary was less than 2000 yuan, but now the average salary is more than 2600 yuan." Liu Bisheng said that the pressure of rising labor costs on processing enterprises is also very great, which accounts for about 15% of the total cost.

In the opinion of Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., the rise of labor costs is even more stressful than the rise of cotton prices. Because the rise in cotton prices may only be a recent problem, while the rise in workers' wages is a long-term problem to face in the future.

The pressure of upstream price rise is continuously transmitted downward, but garment processing enterprises cannot completely transmit this pressure to downstream brand names and buyers.

Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., said that their products were mainly exported to Japan, and the price increase acceptable to buyers was very limited. For example, if low-grade fabrics are used for clothing, the price of upstream fabrics will rise by 10%, and the price of clothing will only rise by about 3%; Clothing made of high-grade fabrics is slightly better, and the price increase can reach about 5%.

According to Liu Bisheng, chairman of Foshan Antony Knitting Co., Ltd., it is also difficult for them to raise prices to downstream brands. For example, mercerized cotton T-shirts that sold for 112 yuan last year can also be raised to about 120 yuan this year for clothing of the same grade, much lower than the increase in raw materials.

In Liu Bisheng's view, garment processing enterprises are the most passive link in the cotton price rise, and also the most hit link. "On the one hand, upstream fabric enterprises can not avoid the upward pressure; on the other hand, brand enterprises are unwilling to bear more cost pressure. We have become a layer in the cracks. There is no way, the bargaining power is too low, which is the game in business." Liu Bisheng sighed.

Cai Jinhui, the business manager of Fujian Best Clothing Co., Ltd., also said frankly that the orders of domestic brand companies are friendly and cooperative for a long time. When the raw materials rise, the brand companies will consider accepting the request to adjust the price of finished clothing products as appropriate; However, it is difficult to increase the price of orders from abroad.

Under so much pressure, garment manufacturing enterprises are struggling. Some small processing enterprises can only close their doors and close their businesses when they are unprofitable.

According to Zhu Danying's estimation, about one third of small enterprises in Dalian are closed. In the past years, they received some orders from abroad, and they had to distribute some of them to local small enterprises to complete them. But this year, there are not many small enterprises to receive their orders.

"After all, small enterprises have a lower risk resistance ability. As long as they don't make money, they will close down or switch to other industries. Large enterprises like us can still hold on, but if the cost continues to rise like this, it will be difficult to sustain." Zhu Danying said.

According to Liu Bisheng, some small garment processing plants in Guangdong also closed down.

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

"During this period, many orders came to us. However, due to the difficulty in raising prices, we did not dare to take more orders." Liu Bisheng said, "Now we are not making much money. If the cost continues to rise, we will end up in vain for a year without saying anything, and may lose money, so we can only choose to take orders from some old customers."

Zhu Danying also said that although it is easier to receive orders now, they are also more cautious in receiving orders due to cost pressure, and it is expected that the number of orders received throughout the year will decline significantly.

countermeasure

Take multiple measures to solve the cost pressure

In view of the crazy rise of raw materials such as cotton prices, enterprises have taken some measures to deal with it.

First, integrate clothing and textile materials. It is recommended that customers place orders not to use cotton, or reduce the content of cotton, or use other relatively stable textile materials such as viscose to achieve relatively stable production and operation conditions.

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

Third, use a large amount of funds to reserve reasonable sources of goods.

Fourth, adopt multi-channel cotton yarn raw materials. In addition to mainly importing yarn to large factories, you can also import yarn from small factories to make up for the price difference and financial pressure.

Fifth, improve the technical content of products, improve the production management level of enterprises, strengthen order management, consider the factors that affect the price of materials, and further put the impact of rising raw materials under control.

Increasing added value is fundamental

Value added is not only a brand enterprise, but also a processing enterprise can pursue value added.

In this wave of rising cotton prices, many garment manufacturers fully realize that only by continuously improving the added value of their manufacturing brands can they enhance their bargaining power and enhance their anti risk ability.

Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., said that for a long time, "Made in China" has become the symbol of "low price", and now it is time to break this concept.

　　 Jiang Hengjie, consultant of the China National Garment Association, believes that the rise in cotton prices has indeed brought great pain 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 added value.