Who Will Be Crushed By Soaring Cotton?

Cotton prices change every day, and business pressures exceed the financial crisis, which will affect exports next year.

In November, when the weather was cold, Tam Chung Wang was sweating every day because "cotton was crazy."

On the morning of November 4th, the general manager of the Weifang Dong Tong Textile Co., Ltd. received a telephone call from the cotton yarn supplier.

"Today, the price of cotton yarn is 34000 yuan per ton, do you want it?"

"Leave me 20 tons," he said.

Tan Zhongwang hastened to call the company's finance and asked for a quick payment of 20 tons.

Who would have thought of this afternoon?

"Leave me 20 tons!" Tam Chung Wang was very polite.

"Not so much, we can only give you two tons! We are also very difficult. Cotton is rising every day, and we can't stand it!" the other party is very polite.

On the morning of 5, the telephone of the cotton yarn supplier came again.

"What do you want to do? I don't want to deal with it. If I fail to deliver the goods, it will be equivalent to breaking the contract. Do I have to order later? Does the factory still have more than 100 workers living?" Tan seriously worried. "Now is the only way to make a single, compensate for it. It's difficult to export textile enterprises."

In the textile industry, it is not only Lao Tan who is "looking at cotton and sighing".

From September to early November, China's cotton prices climbed steadily, from 18000 yuan per ton to 30 thousand yuan, or about 70%.

In the textile industry, cotton is the most basic raw material, especially in underwear, home textiles and other fields. Cotton fiber accounts for almost 60% to 70% of the manufacturing cost of the enterprise.

Soaring cotton prices, like the fall of the first Domino, quickly spread to all aspects of yarn, fabric, finishing and other industrial chains: the price of cotton yarn doubled, the price of cotton cloth increased by 30%, and the ex factory price of pure cotton towels rose from 7 to 2.8 per gram.

"This cotton price is simply horrible! No one dared to talk about the list now. We have no confidence to go on with the list."

Yang Hua, President of Nantong wish Home Textile Co., Ltd. returned from the "Canton Fair".

In the face of the enthusiasm of new customers such as America and the Middle East, he was not excited because both sides were worried about the price of raw materials and could not fix prices.

"The price of fabric can not catch up with the price of cotton yarn, and the retail price can not catch up with the price of fabric. Now we dare not print the price tag."

From September to March of next year is the busiest golden season for textile enterprises. But nowadays, nearly 60% of the cotton textile enterprises in Jiangsu, Nantong, Shandong Wendeng and Zhejiang Yuhang stop working.

Export companies, in particular, are now facing more adverse factors such as exchange rate pressure and European debt crisis.

"Cotton prices will greatly reduce the overall affordability of the textile industry with a small profit margin. The growth of the whole industry in the first half of next year will face great impact."

Yang Zhaohua, President of the China Household Textiles Association, said that the latest sample survey showed that only 70% of the home textile enterprises above designated size are still in operation, and the average profit margin of the industry has dropped by 30%.

Not only are exports affected, but also the fiercely competitive domestic consumer market has been spared.

"Despite the fierce competition in the lower reaches of textiles, the price increase is a foregone conclusion."

Ge Kun Ming, manager of Beijing's dream house, said that the price of the product has increased by 20%. Even if it is difficult for consumers to accept the price increase, the retail price of home textile products will also be increased by reducing the discount.

Just because of the process of digestion, the rate and magnitude of retail price increase will not be as fast as that of upstream products.

The chain reaction of soaring cotton prices has even been pmitted to non cotton fibers and spread to other industries outside the textile industry.

"As the primary substitute for cotton, chemical fiber varieties represented by polyester staple fiber and viscose staple fiber are also driven up by cotton prices," he said.

Ma Jianping, director of the production department of Zhejiang Hadley new material Limited by Share Ltd, said that since November, the price of PET chips has risen by almost a few hundred yuan per day. According to the price increase of raw materials, the company has raised its price two times.

"The impact of cotton prices will spread from clothing, home textiles and other civilian areas to the field of industrial textiles, which will involve manufacturing costs in many industrial fields such as construction, pportation, aviation and sanitation."

Cotton prices are not hard

Cotton prices and cotton prices have been pushed up by factors such as cotton production and demand, dollar depreciation and hot money speculation.

What is the price of cotton? How long can cotton price go crazy?

A series of question marks in the textile industry just broke out of the shape of Yang Hua said it is not clear, struggling for the most part of the life of Tan Zhongwang is also not clear.

Zhu Wenzhong, Secretary General of Nantong Haimen Home Textile Industry Association, has also been cautious in explaining the macroeconomic situation for a long time. "It should be the result of multiple factors."

"China's cotton price rise is not isolated. The fundamentals of global cotton supply and demand determine that cotton prices will rise this year."

Cotton Corp Global Supply Chain Senior Customer Manager Zhang Ligang analysis, in recent years, cheap price hurt farmers, many cotton farmers turn to planting soybeans, corn and other cash crops, the global cotton planting area is shrinking.

Coupled with the extreme weather such as rain, snow, freezing, drought and so on, the main cotton producing areas such as China, the United States, Pakistan and India are on the rise.

US Department of agriculture information shows that global cotton output will decrease by 20% from 2009 to 2010 in the year of 2006 to 2007, and the gap between production and demand will be 3 million 500 thousand tons.

The National Bureau of statistics data show that China's cotton acreage and production has declined for three consecutive years.

From 2007 to 2009, cotton production was 7 million 620 thousand tons, 7 million 490 thousand tons and 6 million 400 thousand tons respectively.

Cotton production in China is also not optimistic this year.

When global cotton supply decreased by 5% in the year 2009 to 2010, global cotton consumption demand increased by 7%, which aggravated market tension.

The revival of traditional European and American markets and the rapid development of emerging markets have been a hot spot for low-grade products, which are mainly made of cotton fibers.

As the largest textile producer in the world, China's cotton fiber consumption is also concentrated due to the recovery of the market.

In addition, some enterprises reflected that the order that should be delivered in 6 and July was forced to move to the fourth quarter after being affected by the "power restriction on the sluice". It also increased the demand for cotton in the short term and aggravated the tension of supply and demand.

In addition to the tight relationship between supply and demand, ample liquidity has also poured a large amount of money into the cotton futures market to fuel the "high fever" cotton price.

In November 9th, cotton prices in the New York intercontinental futures exchange surged 54% in two months, and cotton prices in the London intercontinental futures exchange hit a record high for many consecutive days.

"The depreciation of the US dollar has led to the rising international cotton futures price and has remained at a high level.

China's cotton fiber consumption accounts for half of the world's total consumption, and this import effect is inevitable.

Zhu Wenzhong introduced.

In November 8th, the Zhengzhou mercantile exchange closed in May next year, the cotton futures closed at 32 thousand and 900 yuan per ton, a new high, up to 6.29%, the chemical fiber raw material PTA futures closed all day in the price, closing at 10 thousand and 500 yuan per ton, or 6.02%.

"Even if the supply and demand is tense, 30 thousand yuan and one ton can not be delivered, it is not a normal supply and demand relationship. There must be speculation in the venture capital."

Yang Zhaohua said, many enterprises reflect Cotton Traders hoarding and raising prices.

Even in the international context, China's cotton prices are staggering.

"Many American businesses feel that China's cotton prices are a bit high, and futures prices and real prices interact with each other to push up expectations."

Zhang Ligang said the US Department of agriculture's survey showed that the output of cotton in the United States from 2010 to 2011 will increase by 55%, and the global cotton output will increase by 8% from 2011 to 2012.

"There is no need for enterprises to panic buying, because the market situation in China will become the promoter of soaring international cotton prices."

In addition, the promotion of labor prices, fuel price increase and pportation costs have also contributed to the rise in cotton prices.

Enterprises call for clearance of idle funds

The state should promptly introduce specific measures to curb the soaring cotton prices and speed up the development of non cotton fibers and the recycling of waste cotton fibers.

In the face of soaring cotton prices, China sold more than 1 million 10 thousand tons of national cotton reserves in the end of August to the middle of October.

However, because of the new and old cotton's annual handover period, the national cotton store was soon snapped up by enterprises.

After the end of the national cotton sale, the domestic cotton market is mainly supplied with newly listed cotton seeds, while the low seed quality of the cotton seeds has led to a continuous rise in cotton prices.

"Cotton prices have been on the low side for a long time, and the cotton growers will benefit from the timely increase, and the planting area and quality will be improved in the future.

We just want it to rise steadily and not to be baffled. "

Yang Linshan, chairman of Zhong Wang Holdings Limited and President of Yuhang Home Textile Industry Association, said, "there must be a big drop after the big rise.

If the hot money that supports cotton prices suddenly withdraws, it will lead to a sharp fall in cotton prices, which is a disaster for the textile industry, for cotton farmers or for our country.

Zhong Wang holdings main decorative cloth, profit margins have been maintained at 10% to 15%, but now the cotton price is pressed "no profit", the order in December is no longer connected.

"In order to increase the added value of products, we specially hired millions of annual salaries to hire foreign designers, but pformation and upgrading is a long-term project. Now the added value is no longer improving, nor can it catch up with the soaring cotton prices.

We have no cards to go out, and we suggest that the government put the cards on the table and introduce policies as soon as possible to curb irrational inflation of cotton prices, "Yang Linshan said.

The release of authoritative information is also the demand of enterprises.

Yang Zhaohua said that enterprises have repeatedly sought help from industry associations, hoping that the government can release the statistical data and analysis of the cotton market in the near future, and prevent individual capital from making up the price information on the pretext of reducing production and so on.

"How is the cotton output this year and whether the current cotton price deviates from the real value and how far away it is?"

Yang Zhaohua said.

"If it is really speculation, we should clear the hot money as soon as possible. The real economy that just breathed from the financial crisis can't afford to toss it again."

In the face of the industry's appeal, in November 8th, the 7 departments of the national development and Reform Commission issued urgent notices, requiring the relevant departments of the cotton producing areas to strengthen the investigation of the rental of social idle funds or the acquisition of processed cotton, and seriously investigate and punish the illegal activities that disrupt the market order and fail to fulfill the quality obligations.

"In addition to the government's strong policies, the textile industry itself should strive to pform and upgrade, digest the pressure of rising costs and resist the risk of price fluctuations."

Sun Huaibin, director of the China Textile Economic Research Center, said that increasing the fiber sources and enhancing the substitution of cotton fibers and introducing the circular economy into the textile industry are the long-term solutions to the rising prices of raw materials.