The Export Competitiveness Of Cotton Textile Industry Is Weakened

China is the world's largest cotton producer, consumer and importer, and has been implementing the cotton storage and import quota system for many years. Since the implementation of the open cotton purchase and storage policy in China in 2011, the domestic cotton price has been significantly higher than the average price of the international market in the same period, leading to the widening of the difference between domestic and foreign cotton prices, which has been continuing. In 2013, under the background of the decline of domestic cotton planting income, the purchase and storage policy was forced to continue. In the first half of the year, the domestic market cotton price was still basically set around the purchase and storage price, while the foreign cotton price was still weak under the weak supply and demand pattern. Although the difference between domestic and foreign cotton prices narrowed slightly, the overall price remained at a high level of more than 4000 yuan. In the case of limited import quotas, most cotton textile enterprises can only purchase domestic cotton at high prices. The cost pressure is high, and the export competitiveness of the cotton textile industry is weakened.

In the future, in the 2013/14 cotton year, affected by the downturn in downstream demand and the overall increase in output, the global cotton inventory consumption ratio will reach a historical peak, and the global cotton will maintain a loose supply and demand pattern, and the cotton price will rise weakly. However, affected by weak external demand and declining domestic demand growth, downstream demand for domestic cotton is sluggish, and China also faces great pressure on inventory digestion. However, under the influence of the current collection, storage and quota system, China's cotton price is still determined by policies rather than market factors. In the next year, the domestic standard lint price of 20400 yuan/ton will still be significantly higher than the foreign cotton price. For domestic majority without quota spin As far as enterprises are concerned, the cost pressure of raw materials they are facing is still large in the short term.

The open cotton purchase and storage policy has continued. In the first half of 2013, the difference between internal and external cotton prices remained at a high level, and the cost pressure of domestic cotton textile enterprises was high

China is the world's largest cotton producer, consumer and importer. Since 2005, its annual output has been about 5.5 to 7.5 million tons, accounting for about 30% of the world's output. Its total consumption has been about 7 to 10 million tons, accounting for about 40% of the world's consumption. In recent years, except for a few extreme years, China's annual cotton import volume has remained about 2 million to 3 million tons. Cotton is the main raw material for cotton spinning enterprises, and the cost of raw materials accounts for about 60% of the production cost. Textile enterprises have small profit space, poor cost transfer ability, and are more sensitive to changes in raw material prices. From 2010 to 2011, the price of cotton market fluctuated violently. In order to stabilize the market fluctuation and protect the enthusiasm of cotton farmers, China adjusted the original regional, temporary and limited cotton purchase and storage policy to an open purchase and storage policy with annual pricing and year-round normalization. However, with the fall of cotton prices in the global market, the cost of domestic cotton planting is high, and the difference between domestic and foreign cotton prices is significantly inverted. The difference between domestic and foreign cotton prices is more than 5000 yuan. In 2011 and 2012, the price of standard lint in stock was 19800 yuan/ton and 20400 yuan/ton respectively, higher than the average price in the global market. In terms of import, China implements the cotton import quota system. Since 2004, the annual cotton import tariff quota has been 894000 tons. In addition, there are different quota increments each year. However, the import quota is generally limited, and most domestic textile enterprises are forced to use domestic high priced cotton, bearing a greater pressure on the cost of raw materials.

Since 2012, due to the sluggish overall operation of the domestic textile industry, the demand for cotton in the domestic market is not strong, while cotton related planting costs are still rising, and the enthusiasm of cotton farmers is further reduced. According to the survey data of China Cotton Association, in 2013, the area of cotton planted in China was 68.16 million mu, a year-on-year decrease of 6.8%, a record low in 10 years. In this context, in order to maintain the enthusiasm of domestic cotton farmers and ensure the long-term domestic cotton supply, the open cotton purchase and storage policy was still continued, and the purchase and storage prices were flat compared with the previous year. From the specific price level, from January to July 2013, the cotton market basically continued the operation trend of 2012 under the weak supply and demand pattern. Domestic cotton market transactions and prices are still dominated by policies. From September 2011 to March 2013, 9.6367 million tons of cotton were collected and stored, and from September 2011 to mid July 2013, 3.4453 million tons of cotton were sold and stored. The transaction price (converted into 328) of cotton was about 18500~19500 yuan/ton. Internationally, supported by China's high purchase and storage prices, global cotton prices rose slightly in the first half of 2013. From January to May, the average price of China's import cotton price index (converted into RMB at 1% tariff) was 14044 yuan/ton, 14068 yuan/ton, 15501 yuan/ton, 15313 yuan/ton and 15043 yuan/ton, respectively. In the first half of 2013, the difference between domestic and foreign cotton prices was about 4000~5000 yuan. Although it was narrower than that in 2012, the domestic cotton price was still high compared with that abroad.

In 2013/14, the global cotton supply is loose, and the positive price difference between domestic and foreign cotton will still exist. Domestic textile enterprises will still bear greater pressure on raw material costs

The loose situation of global cotton supply will continue in the next year. First, in terms of demand, textile clothing The industry has a certain periodicity. The slow recovery of the global macro-economy in the future will still largely affect the downstream demand of the textile and clothing industry. It is expected that the industry demand will continue to be weak in the short term. Secondly, in terms of supply, according to the monthly forecast report of cotton supply and demand issued by the U.S. Department of Agriculture, the global cotton output in 2012/13 and 2013/14 cotton years [1] was 26.334 million tons and 25.696 million tons, respectively, and the output level was at the peak since 2005. The global cotton ending inventory will reach 18.459 million tons and 20.54 million tons respectively, and the inventory will climb to the highest value in nearly 10 years. In 2013, the inventory consumption ratio will reach 86%, the highest point since there are statistics. In a loose supply environment, foreign cotton prices lack the impetus to rise.

In terms of domestic cotton supply and demand, in the near future, the domestic textile and clothing industry will continue to be depressed and the downstream demand for cotton will be sluggish due to the downturn in foreign demand and the decline in domestic demand growth. In terms of supply, according to the monthly report of cotton supply and demand forecast issued by the U.S. Department of Agriculture, China's cotton output in 2012/13 and 2013/14 cotton years will be 7.62 million tons and 7.403 million tons respectively, and the ending inventory will reach 10.508 million tons and 12.831 million tons respectively, accounting for 56.93% and 62.47% of the global inventory in the same period. In 2012, China's cotton inventory consumption ratio was 139%, and the current inventory pressure is very great. On the whole, domestic cotton supply and demand is loose in the short term. Under the current supply and demand environment, the domestic cotton price trend is mainly affected by the purchase and storage and quota policies. From September 2013 to March 2014, the state will still open the purchase and storage at the price of 20400 yuan/ton. In the case of loose supply of foreign cotton, it is expected that the price difference between domestic and foreign cotton will remain at a high level.

In the context of the current inverted cotton prices in the domestic and foreign markets, different types of textile enterprises are affected by price differences to different degrees. Enterprises with quotas face significantly less cost side pressure than enterprises without import quotas, and the advantages of having quotas are more significant for domestic enterprises. From the perspective of 14 listed companies and bond issuers in the A-share cotton textile industry [2], export-oriented enterprises with quotas, represented by Vosgay, have little effect on performance improvement because their export prices mainly refer to international cotton prices. In 2012, Voday Co., Ltd. purchased 75300 tons of imported cotton, accounting for 94.13% of the total cotton procurement. The average purchase price was 13300 yuan/ton. The gross profit margin in 2012 was 15.97%, down 1.28 percentage points from the previous year. Domestic enterprises with quotas, represented by Weiqiao Venture, have increased their profit margins due to relatively low raw material costs. Weiqiao Venture has an annual import quota of 300000 tons, which is at the leading level in China. In 2011 and the first half of 2012, the purchase volume of imported cotton accounted for about 40% and 74% of the total purchase volume, and the average purchase price of cotton in the first half of 2012 was 14000 yuan/ton. In 2012, the gross profit margin of Weiqiao Venture increased by 1.28 percentage points to 8.80%, and the gross profit margin of its subsidiary Weiqiao Textile increased from 1.8% to 6.8%, showing a significant improvement in business performance. The cotton enterprises represented by Lutai A that are partially self-sufficient have reduced part of their costs through the synergy of the industrial chain. In 2012, Lutai A produced 17500 tons of cotton, and the cotton self-sufficiency cost was about 16020 yuan/ton [3], which to some extent eased the pressure of raw material outsourcing costs. However, on the whole, since the import quota issued by China each year is less than 25% of the annual demand, most domestic cotton textile enterprises will still face greater pressure on raw material costs in the short term, except for some large enterprises that meet the quota application conditions. In the case of high price difference between domestic and foreign cotton, the rising cost of raw materials will aggravate the weakening of export competitiveness of the cotton textile industry.