How Should Textile Enterprises Avoid Risks Arising From Fluctuations In Cotton Prices?

In the past two years, the "roller coaster" has been used to describe the country. Cotton price Not too much. Starting from September 2010, domestic cotton prices rose wildly. In October 18, 2010, China's cotton grade 1 to the factory price was 25577 yuan / ton, the 2 level was 24946 yuan / ton, the 3 level was 24256 yuan / ton, 4 level was 23724 yuan / ton, 5 grade 22335 yuan / ton, compared with September 1st, the price increase was close to 40%. The rising cotton prices made the domestic textile and garment enterprises face enormous pressure to survive.

Many enterprises still have a lingering fear of soaring cotton prices in that year. Analysis of the causes, more people attributed it to the speculation of domestic hot money. No matter what the reason is, if cotton price is a simple trend upward, the industry will take effective measures to deal with this trend. But in fact, the next trend of cotton prices has made the industry miserable.

After entering 2011, domestic cotton prices showed ups and downs. In the first half of March, the price exceeded 31 thousand yuan / ton, which was 15% higher than the beginning of the year. After that, cotton prices went down all the way, and the August price fell by more than 60% over March. The sharp fluctuations in cotton prices not only cause the production and marketing of cotton spinning enterprises to be sluggish, inventory increases and profits decline, but also the negative effects extend to the entire industrial chain, which affects the normal production and market confidence of the upstream and downstream enterprises, and seriously hampers the stable operation of the whole textile industry. It is understood that the cotton textile industry doubled its losses last year, with a deficit of more than 10%, which is directly related to the fluctuation of cotton prices. "The industry is not afraid of the rise or fall of raw materials. The fear is that prices will rise and fall." Sun Huaibin, director of the information center of China Textile Industry Federation, said.

Wang Tiankai, President of the China Federation of textile industry, said that in 2011, domestic cotton prices fluctuated significantly in relation to output growth, demand changes, credit contraction and market speculation. China's cotton price mechanism has not yet been integrated with the international market. The new import management system can not effectively regulate domestic processes with international market resources, and it is difficult to balance the domestic and foreign cotton prices, and lack effective restraint system.

Before the "two sessions" this year, the China Textile Industry Federation (hereinafter referred to as "China Textile union") convened the "2012 textile industry economic situation conference". This reporter obtained the relevant economic data of last year's domestic textile and apparel industry running from this conference: in 2011, the total export volume of textiles and clothing was 254 billion 120 million US dollars, up 19.9% over the same period last year, and the growth rate was 7.2 percentage points lower than that at the end of April. Among them, the export price increased by 19.3% compared with the same period last year, and the number of exports increased by only 0.5% over the same period last year.

Sun Huaibin, director of the China Textile Industry Federation Information Center, said that the growth of exports was mainly due to the push up of price growth. "Last year, the export volume of the industry was mainly due to the decline in the quantity of cotton products. Because cotton prices have been falling sharply last year, cotton products have fallen into difficulties, and the cotton textile industry has lost more than 10% of its losses.

Inverted price of cotton at home and abroad

Since September 2011, the state has implemented 19800/ tons of cotton purchase and storage prices, and thereafter domestic cotton prices have stabilized. But another problem is that although domestic cotton prices are stable, international cotton prices are much lower than domestic ones. As of May 25, 2012, the price of domestic grade 328 cotton was 18853 yuan / ton, and the cotton price in the international market was 83.3 cents / pound. After 1% duty and value-added tax, the price was 13393 yuan / ton, and the cotton price in the international market was lower than the domestic market price 5460 yuan / ton.

Sun Huaibin, director of the China Textile Industry Federation press center, believes that the continuous expansion of domestic and foreign cotton prices has weakened the international competitiveness of the textile industry and seriously affected the stable operation of the cotton textile industrial chain. According to historical data and enterprise's reflection, domestic and foreign cotton price difference is controlled at less than 1500 yuan per ton. The textile industry's economic indicators are expected to reverse the downward trend. "If the cotton price problem can be solved as soon as possible, although the external demand is sluggish and domestic demand is slowing down, the textile industry will still be able to rely on its own structural adjustment and spanformation and upgrading to ease the problem of insufficient market demand."

Yu Jiang, senior research fellow of the mid term Academy of agricultural products, believes that there are two main reasons for the difference between cotton prices inside and outside the country: first, the global macroeconomic downturn and the decline in cotton consumption, coupled with the overall oversupply of global cotton in 2012, resulting in a significant decline in international cotton prices. Two, the domestic cotton has 19800 yuan / ton storage price in 2011 and 20400 yuan / ton in 2012, which makes the domestic cotton price decline significantly lower than the international cotton price, and the difference between domestic and foreign cotton prices is constantly widening.

According to media reports, in June of this year, the cotton futures of the Zhengzhou Mercantile Exchange fell sharply due to the deterioration of the European debt crisis. Then, many profits made the cotton price rebounding, but the weak fundamentals inhibited the rebound in cotton prices.

Analysts at Wanda futures believe that because domestic cotton prices are much higher than the international cotton prices, textile and apparel are not competitive in the international market, domestic consumption continues to shrink, and cotton yarn and gray fabric prices remain on the decline. These factors, in turn, inhibit domestic cotton prices. As of June 29th, the 1301 contract of zhengmian main force was closed at 19205 yuan / ton, down 250 yuan / ton compared with 19455 yuan / ton at the end of May, continuing the long and medium term downtrend.

Insiders said that because the price of Zheng cotton was much higher than the domestic spot and international cotton prices, it was not attractive to the cotton mill, and domestic textile enterprises used imported cotton extensively, and some traders had begun importing cotton with full tariff, which led to the increase of domestic cotton sales pressure and the decline of spot cotton prices.

According to the head of a cotton textile enterprise, cotton textile enterprises account for 60% of its cost. At present, the gap between domestic and foreign cotton is too large, and imported cotton is cheaper than domestic cotton per ton for thousands of yuan, and can not get cheap imported cotton, so the enterprises will face great pressure. It is understood that in March 19th, domestic cotton prices were 19654 yuan / ton, lower than the storage price, but higher than foreign cotton prices on average 3000-4000 yuan per ton. At present, domestic and foreign cotton price difference is maintained at around 4500 yuan.

Domestic cotton prices are high, so companies are more eager to use cheaper imported cotton. According to statistics from the General Administration of customs, China imported 502 thousand tons of cotton in May, an increase of 357 thousand tons compared with the same period last year, an increase of 246.2%. From 1 to May, China imported 2 million 580 thousand tons of cotton, an increase of 113.8% over the same period last year.

The problem is that imported cotton is not readily available. According to the current regulations, cotton is restricted to import commodities, and enterprises must apply for quotas. According to past circumstances, the import quotas that have been issued in recent years have not yet been seen this year. According to reports, recently, Fengyuan, Shandong Spin Factory manager Liu Yunyong went to Qingdao bonded area to run very diligently, the purpose is to see if there is any way to buy imported cotton in the port warehouse. Liu Yunyong said, now waiting for cheap cotton use, because at present domestic and foreign cotton price difference over a thousand yuan, this gap is very big.

According to the national cotton import tariff policy, import cotton quota includes 1% tariff quota and sliding tax quota two parts.

Sliding quasi tax is a method of levying tariffs from low to high with the price of imported goods from high to low. The higher the price of imported goods, the lower the import tariff rate and the lower the price of imported goods, the higher the import tariff rate. The Levy of such tariffs is mainly to keep the price of the sliding tariff goods at a predetermined price standard, regardless of the import price, so as to stabilize the market price of the domestic goods in the importing country and minimize the impact of the international market price fluctuations. Since May 2005, China has imposed a sliding tax on cotton import quotas other than tariff quotas, with a sliding range of 5%-40%.

It is understood that in September last year, the national development and Reform Commission announced the import quota of 1% cotton tariff of China in 2012, the number of which was 894 thousand tons, and the quota has remained unchanged since 2004. Because the state has higher requirements for the qualification of enterprises within the 1% tariff quotas, so for the vast majority of small and medium-sized enterprises, the issuance of cotton quasi tax quotas is more substantial for them. According to past practice, the issuance of quasi tax quotas will normally be increased according to market conditions. Due to the low domestic cotton prices and the low enthusiasm of cotton growers, the tax quota was sluggish in 2012. As a result, the quota shortage phenomenon is gradually emerging. A large number of small and medium-sized enterprises without import quotas import cotton can only be backlog in the port.

It is worth mentioning that in 2012, the country adjusted the formula of sliding quasi tax for imported cotton. Some analysts believe that after the adjustment of the tax formula, the cost of imported cotton has been increased, and the difference between imported cotton and domestic cotton price has been narrowed, which is much more beneficial to domestic cotton market. However, due to the limited scope of adjustment and the limited extent of adjustment, the impact on domestic cotton prices is limited. The future market should pay more attention to how the national quota of cotton imports will be issued in 2012, and the quantity and rhythm of the quotas issued by the imported cotton will be a more crucial factor affecting the cotton prices in the future.

The analysis report of China's textile industry in the first half of 2012 released by the Ministry of industry and information shows that the difference between cotton prices at home and abroad has been widening since the fourth quarter of last year. As of July 5th, cotton prices at home and abroad were about 4500 yuan / ton. The increasing price difference between domestic and foreign cotton has seriously weakened the international competitiveness of China's textile industry. Data show that the number of cotton yarn exports decreased by 9% in the 1-5 months compared with the same period last year, and cotton yarn imports increased by 78% compared with the same period last year. The imports of pure cotton fabrics increased by 133% compared with the same period last year, while the export volume of cotton products decreased by 3.4% over the same period last year. The cotton mill of China Cotton Textile Association has seen a loss of 40% of its textile products, and less than 30 thousand spindles of spinning enterprises have cut production and production close to 50%. Xinjiang is mainly producing cotton spinning primary products. At present, the loss of textile enterprises has reached 65%, the sales revenue of the whole industry has dropped by 25%, and the loss of the whole industry has exceeded 300 million yuan.

Multi angle response to cotton price fluctuation

Although the US and Japanese consumer markets are stabilizing and improving, there are still many uncertainties. China Textile Federation expects that in 2012 years, if domestic and foreign cotton prices are not narrowed, the export situation of China's textile and clothing will continue to be severe.

Cotton is an important raw material in the textile and garment industry. Its price trend will undoubtedly affect the whole industry. In the 1-3 months of this year, the total profits of textile enterprises above Designated Size totaled 53 billion 704 million yuan, down 1.77% from the same period last year, the growth rate was 55.34 percentage points lower than that of the same period last year, and the sales profit margin was 4.5%, a 0.66 percentage point decrease over the same period last year. In this regard, sun Huaibin said that chemical fiber and cotton textile industry is the main source of profits in the whole industry. Because of the poor performance of the two industries, the overall profit growth of the whole industry is not good enough, and the deficit has expanded. It is easy to see the whole industry's dependence on the cotton textile industry.

How can we reduce the industry's dependence on cotton? The whole industry should increase the development of alternative raw materials, that is, the key is to increase the development of non cotton fibers, super simulation fibers and super Imitation cotton fibers. Enterprises try to diversify, increase the proportion of non cotton products, and use product structure adjustment to avoid the risk of cotton price fluctuations.

Shandong Huimin Kidd science and technology Textile Co., Ltd. put the development of new fiber products as a measure to deal with the fluctuation of cotton prices. According to Zhang Chongyuan, deputy general manager of the company, since 2010, the company has turned from the production of cotton yarn to the development of new fibers represented by Tencel and modal. "When cotton prices were high, the company developed new fiber products to reduce the amount of cotton used. Now the price of cotton has dropped, and the demand for new fiber products has not decreased. "

In addition to increasing the development of alternative raw materials, there is a very important way to reduce the risk of cotton price fluctuation, that is, to increase the added value of products. We should strengthen the R & D and industrialization of key technologies such as high simulation, functional, differential and high-tech fiber materials and industrial textiles, and develop personalized, fashionable and low carbon green textile consumer goods to increase added value. In addition, if we can use the input from raw materials such as design, brand, channel and so on to form an added value structure, so that we can get market recognition and sell a good price, so that we can digest the cost of raw materials or other elements, reduce the cotton price rise or reduce the impact.

In an interview with reporters, Sun Huaibin said that for cotton prices, it is suggested that the state reserve cotton should be subsidized in the form of financial subsidies, so that the price of domestic cotton will be reduced and the domestic cotton price will be reduced, and the price difference between domestic and foreign cotton will be narrowed. In the long run, we should deepen the reform of the cotton circulation system, improve the macro control mechanism of cotton, increase the quantity of cotton imports every year, until the double management restrictions of cotton import quotas and sliding duties are abolished, so as to achieve the market docking between internal and external cotton prices, and play a regulatory role in the market mechanism. At the same time, it is necessary to solve the "high and low deductions" (value-added tax 17% deduction 13%) which has long troubled cotton spinning and hemp spinning industries. The textile industry is included in the State Administration of Taxation on the approved deduction of the value-added tax of agricultural products in some industries. Management measures The scope of the trial.