Market Analysis: Economic Operation Of China'S Wool Textile Industry From January To July 2020

In the second half of 2020, for China's wool textile manufacturing industry, the domestic market is going out of the trough of the new crown epidemic. Due to the gradual recovery of domestic residents' living consumption, the epidemic situation of some international wool textile products consumption market areas will improve, driven by the consumer side, the wool textile industry is expected to step out of the lowest point in nearly 20 years.

1、 The domestic retail consumption market recovered, but the international market situation was different

1. The growth of online retail consumption has become the biggest bright spot of domestic retail market

From January to July this year, the total retail sales of domestic consumer goods fell by 9.9% year-on-year, and the online retail sales of physical goods increased by 15.7% year-on-year. Online retail sales of physical goods accounted for 25.0% of the total retail sales of consumer goods, up 5.6 percentage points over the same period last year. Among them, the food and use goods sold through the Internet maintained a rapid growth year-on-year; the wearing goods decreased by 0.9% year-on-year, 2% narrower than that in January June. Online sales has become an increasingly important sales channel.

Figure 1 online retail sales of physical goods and their proportion in total retail sales of consumer goods

Source: National Bureau of statistics

From January to July, the retail sales of textile and clothing and online retail sales of wearing goods of shops above the designated size fell by 17.5% and 0.9% respectively year-on-year, 2.1% and 2% lower than that in the first half of the year (see Figure 2).

Figure 2 year on year change of textile and clothing retail sales and online retail sales of wearing goods of units above Designated Size

Source: National Bureau of statistics

2. The main wool textile products have different consumer markets

The consumer markets of main wool textile products have been impacted in varying degrees this year. As the main import market of wool textile raw materials and products, the EU imported 1.08 billion euro (equivalent to about 1.3 billion US dollars) from January to may, a year-on-year decrease of 29.5%; the total import volume was 70000 tons, a year-on-year decrease of 24.1%. In the other two traditional key markets, the United States and Japan imported 1.19 billion US dollars and 71.49 billion yen (equivalent to US $700 million) respectively from January to July, with a year-on-year decrease of 43.4% and 37.3%; the total imports of 72000 tons and 15000 tons decreased by 41% and 28% year-on-year. It can be seen that the situation of the EU and Japan markets is better than that of the US market, but the import prices of the Japanese market have declined rapidly. The U.S. market has been hit hardest.

Figure 3 import situation of wool textile products in main wool textile consumer market (unit: ton)

Note: EU data are from January to May

Source: Eurostat, Japanese Ministry of Commerce, US Department of Commerce

2、 The production of wool products is better than that in the first half of the year

1. Inflection point of wool textile production decline

With the improvement of market conditions, the monthly output of wool yarn in July exceeded the same period of last year for the first time (see Figure 4), showing an increase. From January to July, the cumulative output of wool yarn decreased by 11% year-on-year, which continued to narrow by 2.7% compared with the same period in the first half of the year. Over the same period, the decline of wool fabric was 17% year-on-year, showing a slow narrowing (see Figure 5). Yarn and fabric are the two main intermediate products of wool spinning products. Their production situation reflects that the production and sales of final products and the whole industry chain have begun to recover.

Figure 4 monthly production change of yarn (wool yarn) from 2019 to 2020

Figure 5 monthly variation of cumulative wool fabric output from 2019 to 2020

Source: National Bureau of statistics

2. The recovery of garment wool is better than that of non garment wool

Compared with the first half of the year, the volume of wool decreased by 1% to 1% compared with that in the first half of the year. The unit price of imports fell by 12% year on year, 0.9% higher than that in the first half of the year. Wool imports from Australia, New Zealand, the United Kingdom and Uruguay fell by 16%, 50%, 39% and 69%, respectively. South Africa's wool imports increased by 134% year on year. Only Australian wool and South African wool showed a year-on-year increase in import volume, while the decline of wool import in other countries showed a further deepening. It can be seen that the market of clothing wool has a relatively good recovery.

3、 Export of wool textile products fall back for the first time

According to the customs data from January to July, the total export volume of China's wool textile raw materials and products was 4.67 billion US dollars, a year-on-year decrease of 31.3%. The overall situation of export was severe, but the decline was 1.9 percentage points lower than that in the first half of the year, and the decline was narrowed for the first time this year.

Figure 6 monthly export volume and cumulative export of wool textile raw materials and products in 2020

Source: China Customs

In terms of products, the export decline of woven products is greater than that of flat knitting products. From January to July, the export volume of wool fabric, wool woven clothing and woven scarf decreased by 41.3%, 42.4% and 58.5% respectively, while the export volume of wool yarn, wool knitted clothing and knitted scarf decreased by 25.5%, 35.9% and 40.3% respectively, and the impact resistance of knitted products was slightly better. Over the same period, exports of artificial fur and blankets fell by 18.4% and 24.8% respectively.

According to the data of China Customs, the export volume of wool textile products to several major export markets showed a decline, and the decline range was more severe than that of the import data of wool textile products in several major markets (see Figure 7). Especially in the U.S. market, according to the data of the U.S. Department of Commerce, the decline in the total import of wool textile products from China was 17% higher than that of the total import of wool products, and the export of wool textile products to the United States was even more hindered.

Figure 7 export situation of main export regions of wool textile products from January to July 2020

Note: for comparison with the data of Europe, America and Japan, the data of artificial fur, chemical fiber blanket and chemical fiber carpet are not included in the woolen textile products here.

Source: China Customs

4、 The decline of income and benefit of wool textile industry narrowed sharply

From January to July, the total operating income of wool textile and dyeing and finishing enterprises above Designated Size totaled 74.4 billion yuan, with a year-on-year decrease of 3.7%, 19.3 percentage points lower than that in the first half of the year, showing an obvious improvement. For the first time in two years, the year-on-year situation was better than the average level of the textile industry, significantly better than the 13.4% decline of the textile industry in the same period. However, the profit margin of industrial enterprises is still seriously squeezed. The average profit margin from January to July was only 0.9%, down 2.1 percentage points compared with the same period of last year.

Generally speaking, although we are still in a difficult period, the industry is facing many difficulties such as insufficient market demand and tight funds. But we can still see that the wool textile industry from the partial and partial start to show signs of improvement. The industry actively seeks development, takes the supply side reform as the main line, strives to maintain the integrity and healthy operation of the industrial chain, actively expands the market, especially pays attention to the expansion of the domestic market, and actively adapts to the market requirements of small batch, multi variety and rapid response. Under the development pattern of domestic large circulation as the main body and domestic and international dual circulation promoting each other, we should work together to seek a way out.