Textile Industry: Slight Increase In The Second Half

The price of raw materials such as cotton, chemical fiber and so on.

Main points:

Chemical fiber and cotton prices have strong correlation and tend to fall with the same price, especially viscose staple fiber and polyester staple fiber, together with cotton constitute the main raw material of cotton spinning, and compete and replace each other at the demand side.

When cotton prices change more violently, the correlation is stronger.

The supply level is very different. Cotton is an agricultural product. Its output is greatly influenced by planting area and weather, and its production is seasonal. Chemical fiber belongs to chemical products. Its output is greatly influenced by raw material supply and operation rate, and its production is continuous.

At present, all kinds of synthetic fibers have little room to fall, and whether we can continue to rise depends on the recovery of downstream demand and the change of cotton prices.

Since the beginning of the year, the price of synthetic fiber has risen to a certain extent due to the demand for replenishment of downstream stocks, and the rise in recent weeks has stopped.

At present, there is no obvious improvement in downstream demand, and external demand is still weak. Demand recovery is a slow and continuous process.

Cotton is still in a state of oversupply, and there is little room for short-term price increases.

The US Department of agriculture (USDA) predicts that the global cotton supply in will exceed the total demand of about 3 million tons, and the inventory consumption ratio will exceed 55%, significantly higher than the last two years.

USDA also lowered cotton consumption in China, and cotton stocks in China increased by 1 million 410 thousand tons to 3 million 930 thousand tons in 2011/12.

The International Cotton Advisory Committee (ICAC) expects global cotton consumption to be weak in the short term but variable in the medium term, which is mainly affected by the economic crisis in the euro area.

ICAC also predicts that global cotton output in will still exceed consumption, narrowing over the end, and ending inventory will continue to rise.

According to the forecast data of these organizations, cotton prices are unlikely to rise sharply in the short term.

domestic

A new national cotton purchase and storage policy is expected to be released at the end of February 2012 or early March. It is estimated that the price will be raised on the basis of 19800 yuan / ton, and cotton prices will probably run in the 19800~23000 yuan range throughout the year.

Valuation and recommendations:

Since the second half of 2011, upstream textile enterprises are facing pressure from weak external demand, low prices of raw materials and short term orders from downstream enterprises, and their performance has deteriorated from quarter to quarter in the second half of 2011.

After the stock price adjustment, the current valuation is generally low.

It is expected that the first half of 2012 will be the low point of the performance of the upstream textile enterprises.

Because of the pro cyclical characteristics of the textile industry, if the price of raw materials can pick up after the second half of 2012, it will enhance product prices and profit margins, and stimulate downstream enterprises to stop watching and increasing orders, which is conducive to the rebound of textile enterprises' performance.

Risk warning: