Cotton Price "Black Swan Event" Perspective

The occurrence of this event is the result of the superposition of multiple factors, reflecting the predicament of the traditional manufacturing industry in China.

Regardless of cotton price

Before discovering the black swans in Australia, everyone thought the swans were white, and once the black swans appeared, the original unshakable belief collapsed in an instant. This is the "black swan event", which implied an unpredictable important event, but it changed everything unexpectedly.

Starting from March this year, the price of cotton per ton fell by 500 yuan on average every 3 days. By the beginning of July, it had already fallen below 25000 yuan. Compared with the highest price, it dropped 10000 yuan per ton in just three months.

Multiple factors superimposed to create "black swan event"

One in Qingdao

However, these factors alone are not enough to bring about such a sharp fall in domestic cotton prices.

The occurrence of "black swan incident" of cotton price actually has a deeper reason.

At present, the textile and garment industry as a traditional industry is facing unprecedented pressure: the textile export tax rebate rate has been repeatedly lowered; labor costs continue to rise, the average annual wage growth of workers is more than 20%; the rapid appreciation of the renminbi has compacted a large number of export oriented textile enterprises' profit margins, resulting in a large number of orders pferring to low cost countries such as Southeast Asia; since last year, the deposit reserve ratio of financial institutions has increased many times, the financing of small and medium-sized textile enterprises has become increasingly difficult to finance, and the Ministry of finance has decided to reduce import tariffs on textile materials such as blended fabrics and linen yarns since July 1st.

It is these factors that overlap and add together to make the domestic textile industry short of demand for cotton, which has led to the "black swan event" that the cotton price has plummeted.

What is even more worrying is that in the face of multiple pressures, the "black swan event" in the traditional manufacturing industry of China is probably not an isolated case.

No matter whether it is skyrocketing or plunging, it is not good.

When domestic cotton prices continued to rise, a number of textile and garment enterprises in our city were seriously affected.

Yimeni group increased its purchasing cost by 37 million yuan last year and occupied the profit margin. In order to avoid the negative impact of cotton price rise, the textile purchasing volume decreased by 15% in March this year. The group's orders fell 20% in the 1-3 month this year, and the direct loss amounted to about 10000000 yuan.

Then, if cotton prices plummeted, does it mean that the textile and garment industry will catch up with another spring after the pressure of high price of raw materials has been reduced?

Yu Yubo, general manager of the textile company, clearly stated that the "black swan event" of cotton price is not good for most textile enterprises. "No matter the price rises or falls, it means that the uncertainty in the market is increasing, which will cause great interference to the raw material stock, order, pricing and even strategic formulation of the enterprise, which will affect the sustained and healthy development of the enterprise."

In fact, domestic textile enterprises have every reason to worry: in such a market situation, since the "black swan event" can happen with cotton prices plummeting, the "black swan event" that cotton prices soared can happen at any uncertain time.

The establishment of a complete industrial chain can reduce the risk of operation

Industry experts pointed out that textile industry in order to effectively deal with the "black swan event", we must speed up the way and structure, specifically speaking, there are two good policies.

First, speed up the elimination of backward production capacity, extend the industrial chain and reduce operational risks; first, improve R & D capability, and constantly introduce new fibers that can replace cotton fibers to minimize the impact of fluctuations in cotton prices.

Liu Cheng, a researcher at the China commercial circulation Productivity Promotion Center, said that in the face of soaring and slump cotton prices, textile enterprises must establish a complete industrial chain as soon as possible to reduce operational risks.

"Cotton textile enterprises should take the initiative to go to the cotton producing area and establish a cotton acquisition base, which can not only protect the cotton growers' income, but also protect their own production needs, and form a complete industrial chain of cotton planting cotton processing cotton spinning weaving dyeing and clothing in one."

The green spinning group of our city has greatly reduced the adverse impact of cotton price shocks by virtue of the "full industry chain advantage".

Yu Yubo said that since 2006, the Green Textile Federation has extended its efforts to the upstream and downstream industries such as cellulose manufacturing, spinning and weaving, home textiles, clothing and so on, forming a "full industrial chain advantage". At the same time, it has actively carried out cotton trade combined with its main business, and has invested more than 15 thousand tons of lint cotton in Xinjiang on the basis of consolidating the overseas cotton trade base.

"When raw material price shocks and other unfavorable factors affect the profits of the textile industry, we rely on the advantages of the whole industrial chain, and make use of complementary cooperation between the upstream and downstream to save production and control costs and form a comprehensive strength."

Rely on alternatives and face cotton prices "roller coaster".

Since last year, cotton price has been greatly affected by Dezhou's Huayuan company. With the successful development of 12 new functional yarns that can replace cotton yarns, the products are exported to many countries and regions, and are hardly affected by the fluctuation of cotton prices. The production and operation are normal and the operating rate is 100%.

Coincidentally, the green spinning group also relies on new products that emerge in an endless stream, and calmly faces the cotton price "roller coaster".

The industry colleagues know that the green spinning group first introduced green environmental fiber Tencel and Model into China and made trial spinning successfully. Thereafter, dozens of high-grade fibers, such as bamboo fiber, spun silk, Australian wool, milk fiber, chitin fiber, soybean fiber, pearl fiber, seaweed fiber, stainless steel fiber, silver fiber, and so on, were developed.

Nowadays, only a small part of cotton fiber is used in the production of textile products.

In 2010, the group's profit grew by 70% compared to the same period last year, and its foreign exchange earning earned an increase of 45.94% over the same period last year.

In the first 5 months of this year, although the prices of raw materials such as cotton were extremely volatile, the group continued to grow at a high speed.