Can Cotton Enterprises Usher In A Recovery Period In 2014?

Looking back three years, small price difference, cotton enterprises bankruptcy

"I don't even know how much a kilogram of cotton is now."

In December 10th, Mr. Li, who ran a small cotton processing plant in Lijin County, reluctantly told reporters: "because of the sluggish industry, I already quit the cotton processing industry."

It is understood that since 2011, in order to protect the interests of cotton farmers, the State implements temporary cotton purchase and storage.

It ensures the price and sale of cotton.

The average price of cotton purchase in recent four years since 2011 is 3.5 yuan / Jin, 4 yuan / Jin, 4.4 yuan / Jin, 3.1 yuan / Jin respectively.

Meanwhile, the cotton price in the international market continued to decline during the same period, which led to the expansion of cotton price at home and abroad.

From the difference of 1000 yuan per ton in September 2011 to 6000 yuan per ton in 2013, the domestic cotton price is about 45% higher than that in the international market.

Because the price of cotton is lower than the domestic cotton price, the domestic and foreign cotton price has become one of the reasons why the quota textile enterprises use cotton extensively.

However, textile enterprises with no quota or quota allocation can only purchase lint from the spot market or the sale of the national reserve cotton store, and the purchase price is higher than that of the outer cotton, resulting in the cost of production of these enterprises is obviously higher than that of the cotton producers, and is higher than that of the similar products abroad.

"This makes domestic cotton textile products do not have international competitiveness."

Xu Zengguo, general manager of Tianxin Cotton Industry Co., Ltd.

Coupled with the lack of market demand, the domestic textile industry is in a state of continued downturn.

A few days ago, the city price monitoring center took various forms such as visits, discussions and questionnaires, etc., and made a key survey of 40 farmers in 8 villages in Lijin, Kenli and two counties, including 4 processing enterprises of Yixing, Xinyi, HSBC and Hua Jie and 4 textile enterprises of Yami, SANYO, Hongyuan and hemispheres.

In the survey, the price of grade three lint market is 13400 yuan / ton, but the total cost of sales has reached 13700 yuan / ton, with a loss of 300 yuan per ton.

This year, part of the processing enterprises are short of funds, the capital gap is large, and the financing pressure is huge.

Most enterprises belong to private self raised loans. The loan interest rate is relatively high, the highest monthly interest rate reaches 2 points, and higher interest payments squeeze out production profits, making the loan interest become the production expectation of cotton enterprises.

According to the results of the city price monitoring center, Dongying cotton enterprises are in a downturn.

According to cotton prices, the price of cotton yarn has been declining this year, and the sale of lint cotton has slowed down due to the international economic downturn and the adjustment of China's economic structure. Most of the cotton enterprises in Dongying are at the edge of losses.

According to the data provided by the Dongying Municipal Commission of letters, there are 56 cotton textile and garment enterprises in our city, of which 23 are on the upper scale.

The textile and garment industry of our city has maintained a flat trend, and the business situation in October has improved slightly compared with that in September.

Large and medium-sized enterprises are in good order, small businesses have less orders and are in a poor state of operation.

Most companies adopt a price reduction strategy to ease inventory pressure and profit margins have declined.

Good cotton prices return to market cost decline

"Cotton prices have fallen, our production costs have been reduced, and the choice is also large."

In December 10th, the purchasing manager of Dongying Hongyuan Textile Co., Ltd. told reporters that the cotton price returned to the market adjustment mechanism, so that cotton textile enterprises with domestic cotton as the main beneficiary would benefit.

At present, according to the products produced by cotton enterprises in our city, there are different sources of cotton, and Xinjiang cotton, real estate cotton and imported cotton are commonly used.

Dongying Hongyuan Textile Co. Ltd is mainly Xinjiang cotton and local cotton, and local cotton accounts for about 70%.

The purchasing manager told reporters that the market price of grade three lint is now around 13000 yuan / ton, which is about 7000 yuan less than that of the same period last year, which greatly reduced the cost of the enterprise.

With monthly demand of 20 tons, the cost per month is only 140 thousand.

The cotton price has dropped, and it can be directly benefited to the cotton textile enterprises which are mainly made of domestic cotton.

City price monitoring center through field research learned that cotton textile enterprises should be the most direct beneficiaries of cotton prices fall.

As cotton prices continue to fall this year, textile enterprises' production costs have come down.

From the data reflected by Hongyuan Textile Co., Ltd., the purchase price of cotton has dropped by about 2 compared with last year.

Industry downturn in the current situation forced pformation of enterprises

The decline of cotton prices this year is supposed to be a good thing for textile enterprises. The price of raw materials has been reduced, which means that the purchasing cost will be directly reduced and profits will increase.

Does this mean that the textile and garment industry of our city will usher in a revival?

"Our days are not easy."

Lijin Yami Textile Co., Ltd. is a large cotton textile enterprise in our city. In December 10th, Wang manager of Yami Textile Co. Ltd. told reporters that 30% of their raw materials rely on local cotton, and the other 70% mainly rely on imported cotton.

The price of the local three grade lint purchased this year is around 13000 yuan / ton, which is more than half the price of 27000 yuan / ton in 2010, which is the highest cotton price.

However, according to manager Wang, the price of lint has dropped, and the cost of production seems to have decreased. But because of the market saturation of cotton textile market, the lack of demand and the sharp fall in prices of products, enterprises have not benefited much from the decline in cotton prices.

Although cotton prices have fallen to the lowest price in five years, cotton prices are running low, but cotton textile enterprises are not having a good time. "At this time last year, our product inventory was more than 800 tons, and this year's inventory reached more than 1200 tons, which is 1.5 times last year.

Mr. Wang recalls that compared to the past few years, their days were better in 2009 and 2010, while the price of cotton was higher in 2010, but the price of the corresponding products was also high.

Demand is also more than now, and the profitability of enterprises is much better than it is now.

This year is not easy for cotton textile industry.

According to the analysis, under the background of oversupply of international cotton market, high cost of domestic cotton and high national cotton reserves, China has implemented the new policy of cotton price, hoping to promote the pformation and upgrading of the long term downturn cotton industry, improve the quality of domestic cotton, reduce the price difference between domestic and foreign cotton, and increase the international competitiveness of domestic textile enterprises.

"The downturn in the textile industry is urging the pformation and upgrading of enterprises."

Xu Zengguo, general manager of Guangrao Tianxin Cotton Industry Co., Ltd. believes that cotton enterprises can only improve their competitiveness by changing their low end products to high value-added and high-end products.

It is reported that in 2015, China will properly arrange the import of cotton according to the supply and demand situation. In addition to issuing the 894 thousand tons tariff quota promised by WTO, it will not increase import quotas in principle, and guide domestic textile enterprises to make more use of domestic cotton.

A textile mill in Lijin County

The head of the purchasing department told reporters that 99% of his company used imported cotton. For the company, he was worried that next year would be a grim year.