Cotton Price Shocks Accelerate Spin Enterprises Differentiation

Fluctuations in cotton prices have left businesses at a loss.

It is less than two months from September 15th to November 10th.

The market will continue to operate at a high level.

In the middle of September, cotton prices went up vigorously in the middle of September, due to the increase of international cotton prices, unfavorable climate and speculation in some areas.

China's cotton price index (grade 328) rose steeply from 10966 yuan / ton at the beginning of last year, rising 420 yuan / ton in September 25th, breaking through 20000 yuan / ton mark, and cotton price entered the "2 era".

By November 10th, cotton prices will continue to enter the "3 era".

On the same day, the Zhengzhou commodity exchange (the "Zheng Shang") cotton futures contract reached a maximum price of 33720 yuan / ton, a record high since 2002.

In November 8th, the seven departments of the national development and Reform Commission jointly with the Ministry of agriculture and the Ministry of Railways put forward six urgent measures to open up a prelude to cotton price intensive regulation.

In from November 8th to 10th, 3 consecutive days, Zheng merchants issued seven notices, including the "de leveraging" measures, including raising the margin, limiting the maximum volume of paction, and eliminating the discount of the opening paction fee.

When the policy of "raising fees and raising insurance" came out, profits funds fled.

In November 11th, it became the turning point of the current cotton price rise.

Zheng Shang Office

However, at present, it is difficult to keep up with the rise of cotton prices by means of administrative means.

The total output of cotton in China is about 7 million tons this year. The total 1/3 of cotton still needs to be imported. The imbalance between supply and demand of cotton has not been fundamentally changed.

According to the US Department of agriculture (USDA), cotton consumption has been greater than output since 2005, and cotton stocks have been in a state of tension for a long time since 2005.

USDA expects that world cotton stocks will decline for fourth consecutive years in 2010, reaching the lowest level in 14 years, and the supply and demand of cotton in the world is still tight on 2010.

The continuous increase in the cost of seed cotton determines that cotton prices can not go down sharply.

According to the investigation and calculation of China Cotton Association, including the price of land itself and labor prices, cotton farmers' cotton planting cost in 2008 was 1100 yuan per mu, 1288 yuan in 2009 and 1600 yuan in 2010, which is expected to be more than 1900 yuan in 2011.

Considering the tight supply and demand situation of the international cotton price, the huge supply and demand gap of China's cotton and the important strategic commodity attribute of cotton, it should be said that the action of repeatedly throwing up the reservoir to curb the price rise will not last for a long time.

After several rounds of dumping and storage, China's official reserves have reached a record low of about 300 thousand tons, and the following cotton control measures are obviously stretched.

In the future, the Chinese government is likely to re-enter the market to replenish inventory, which will exacerbate the tension in the supply of cotton.

With the arrival of the traditional peak season of textile industry at the end of the year, downstream demand will also increase.

In the short term,

Polarization of textile enterprises

As the main raw material of cotton spinning enterprises, cotton accounts for 60%~70% of the cost.

According to the average profit of 12% of the industry, cotton price rises by 1% every time, and the profit of enterprises drops by 0.53%.

Cotton prices have gone up too fast, but the pace of rising prices of finished goods is hard to keep up.

As a typical export oriented industry, textile enterprises' "getting angry" at the two ends can not be easily accepted by consumers by increasing the price of their products.

Cotton textile exports decreased by 12.2 percentage points in the month as textile prices increased and export orders lost much while cotton prices accelerated in September.

On the 108th Canton Fair closed in November, the total turnover of textile and clothing decreased by 2.6% compared with the 107 session.

Textile and garment exports account for 70%~80% of the scale of China's textile industry, and the export situation is not optimistic.

To ease the pressure of rising costs, textile companies are looking for cheaper or cheaper alternatives.

However, the stimulating effect of cotton has led to a significant increase in polyester and other substitutes.

The roller coaster of cotton price makes it difficult for enterprises to predict the medium and long term production and operation costs. In order to avoid the embarrassment of more production and loss, domestic textile enterprises are afraid to take orders, especially fixed prices.

This not only improves the difficulty of the long-term planning of the industry, but also seriously affects the later production and operation of the textile enterprises.

The rise of cotton prices will accelerate the upgrading of the polarization of the textile industry. The bargaining power of large enterprises is strong in itself. With the large reserves of raw materials and strong capital strength, the high cotton prices will have little impact on the production and operation of such enterprises.

The most vulnerable small and medium enterprises in the industry will be affected by the relatively weak economic strength and small bargaining power, which are more vulnerable to the price rise.

In this way, industrial resources will gradually flow to large enterprises with high added value, and industry shuffling is inevitable.