Cotton Prices Boost China'S Garment Industry Upgrading

The rising price of materials triggered by this round of cotton price fluctuation is another new test for China's textile and garment industry after the financial crisis.

2010, November 25th, Christmas.

Beijing Dahongmen business circle, the largest clothing and business integrated market in northern China, is crowded.

Sun Yan, the shopkeeper, was sitting in the stalls of his two floor, looking at the current pedestrian flow. His expression was somewhat dignified.

This "bright spring" shop has been in the market since winter.

"What we do at home is pure cotton goods, and cotton prices are soaring over time, and labor and accessories are also rising. Now the cost of a garment has increased by 20% over the past years. Most consumers may feel powerless."

In fact,

Let cotton fly

Since the second half of 2009, with the gradual recovery of the world economy,

It was obvious that cotton prices rose after "eleven". At that time, cotton prices were like a runaway wild horse with a sweeping force. The cotton price reached a record 33000 yuan / ton in mid November 2010, which was nearly two times higher than that in the same period in 2009.

However, since then, the market has become more and more intense. With the vigorous control of the state departments, cotton prices have been turning sharply like rockets that consume fuel. In December 2010, cotton prices have been hovering around 27000 yuan / ton.

When everyone follows

In fact, in addition to the rigid demand of the world economic recovery, in recent years, the United States, the largest cotton exporter in the world, has been decreasing in cotton planting area. India, the world's second largest cotton grower, issued export restrictions in 2010 to meet domestic demand first. Pakistan, the fourth largest cotton growing country in the world, suffered a rare flood disaster this year, resulting in a substantial reduction in cotton production.

Relevant data show that the annual export of cotton can not be more than 8 million tons per year, and less than 3 million tons of cotton available for China. Since 2010, the number of cotton imported to China is less.

As the world's largest cotton grower and consumer country, China's annual cotton consumption is more than 10 million tons, and cotton production in China has been declining for three consecutive years since 2008. Now, domestic cotton has been hovering around 7 million tons, and output is only 6 million tons in 2009.

On the one hand, the output of cotton is insufficient, and on the other hand, there is not enough cotton to import. Therefore, the supply of less than cotton in the cotton market is the main driving force for the rise of cotton prices.

In addition, another incentive for cotton prices to rise is hot money.

Since 2010, hot money has entered the market on a large scale and invested in the speculation of commodities. Even garlic, mung beans, apples and so on can not be spared. As the main raw material of textile and clothing, cotton is also in the "black list" of the hot money, and with the increasing intensity of speculation, many enterprises are hoarding.

The last drum of the drum

2010 is destined to be a test year for the garment industry. The appreciation of the renminbi and the increase in labor costs have made many enterprises unhappy.

Today, the rising cotton prices give these enterprises a head-on blow, and because of the continuous strengthening of cotton prices, viscose staple fiber and polyester staple fiber and other materials also all red, a sharp rise.

When enterprises can not consume these pressures themselves, there is only one price increase.

Since the second half of 2010, many domestic garment enterprises have raised their retail prices.

In the first half of 2010, XTEP reported that the average selling price of clothing products increased by 13.9%; Anta's earnings showed that the price of clothing products increased by 7.1%; the average retail price of footwear and clothing products in the fourth quarter of Li Ning Co increased by 7.8% and 17.9% respectively.

And correspondingly, the shocking clothing price tag and down jacket of thousand yuan per department store have become a common occurrence.

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And the price increase has become the main weapon for these companies to improve their performance.

According to XTEP's earnings report, the overall revenue of XTEP increased 22% to 2 billion yuan, up 2.1 percentage points to 40.7%, and operating profit margin increased 2.4 percentage points to 22.2% over the first half of the year.

Unlike these big brands, the small businesses like Sun Yan are living on the same day.

"The price has gone up, and the business has not done well. At this time of the year, our business will be very good, but now we can only rely on some old customers to take some goods, and we have a lot of goods in the warehouse."

Sun Yan pointed to a pure cotton jacket hanging on the wall.

As we all know, garment enterprises need to take orders from production to supply for some time, and some foreign trade enterprises have already received large orders of winter wear in the first half of 2010.

In the latter half of the year, the rising cotton prices made them suffer a lot. If they were supplied according to the previous contract, the larger the order, the greater the loss; if the price was raised, it would damage their credibility.

This has left many enterprises at a loss.

According to the latest cotton monthly report released by the China Cotton Association, the total output of cotton in China in 2010 was 6 million 650 thousand tons, though the chain rose, but it still fell 2.1% compared to the same period last year.

It can be predicted that in the next period of time, the market situation of cotton supply will continue, and cotton prices will continue to linger at high levels.

In this regard, Zhou Shaoxiong, President of the seven wolves, said: "all clothing products will rise in price next year, and the price increase will be about 10-20%."

Branding is the only way out

It can be said that the price rise of materials caused by the fluctuation of cotton price in mid September 2010, which started in late 2009, is another new test that China's textile industry has encountered after the financial crisis.

In this test, we can find that the impact of material price increase on mature brands is not very big, because even if the terminal price rises, mature brands still have fixed passenger flow; but for the market unstable foundation, imperfect channels, unable to enter large shopping malls, clothing brands and many OEM garment factories, this clothing price surge has a serious impact on them, and even can be said to have broken their lifeline.

Therefore, export to domestic sales, wholesale to brand is gradually becoming a major trend in the apparel industry.

"Now is the time for us to undertake high-end technology in the world's textile industry", "we need to create new consumption materials, consumption patterns and consumption feelings," said Du Yuzhou, President of the China clothing association.

Hu Xiangyun, director of the production department of Dongguan Jie Sheng Clothing Co., Ltd., said that the company established a brand in early 2010, and is now just a prototype. It is operating according to the brand building mode.

But the effect has been gradually revealed, and the price has increased by 7-8% compared with the simple processing.

"It's really hard to make a brand, but power is in its own hands after all."

Hu Xiangyun said.

Qin Yingfu, Deputy Secretary General of Humen clothing association, said that in the past two years, some garment factories which had made export or wholesale began to pform, and small and medium-sized brands appeared in batches to become the trend, including Cairo Binney, K, VOZO, Floren Park, Yisheng, etc.

"The rising cost of raw materials and manpower is a whole trend, and the clothing enterprise is not able to stop, and the most important thing is to change the pressure of cost rise to the driving force of industry promotion."

Wei Lin, director of the media center of China Textile Industry Association, said: "clothing enterprises must abandon extensive management, increase production efficiency and brand value, otherwise they will be eliminated by this wave."

Therefore, the overall rise in clothing prices caused by the rise in cotton prices is a "flood", rather than a booster of the upgrading of China's garment industry. After this price increase storm, I believe that more enterprises will work hard in branding, and the road of "made in China" to "create in China" will be shorter.