Industry Analysis: What Opportunities Will The Wool Textile Industry Usher In?

The chaotic year of 2020 is finally over. With good results of epidemic prevention and control in China and the market of vaccines, it is expected that in 2021, and in the next two or three years, the consumer market and wool textile industry can achieve better recovery and development, export recovery and market growth. However, the recovery of economy and production is still challenged by repeated epidemic situation, trade interruption and policy changes and influences of various countries. This paper will summarize and review the overall industry and market operation in 2020 from the perspective of global and domestic macro-economy, and explore the opportunities and challenges of the wool textile industry in 2021.

retail market

By November 2020, clothing and apparel products have become the fastest falling category in the global retail industry under the influence of the epidemic, showing a double-digit decline. Among them, the clothing products have dropped by more than 18%, and the clothing, shoes and hats products have fallen by more than 16%. In the global scope, the retail store sales and tourism consumption that they mainly rely on are greatly affected. Among them, the consumption of formal dress, skirt and coat was the biggest hit, with a drop of more than 20%. It can be seen that the global wool textile market will suffer the most in 2020.

From January to November, the cumulative retail sales of clothing, shoes, hats and knitwear products of units above the quota (medium and large shopping centers) reached 1.1 trillion yuan, with a year-on-year decrease of 7.9%. Over the same period, online retail sales of wearing goods (clothing) increased by 5.9% year-on-year. The situation of China's consumer market should be significantly better than that of the global consumer market.

From the perspective of online sales data, although the overall sales scale of online goods is less than that of 2019 in November, the sales scale of wear goods has expanded year on year. In 2020, the growth rate of clothing products has been lagging behind. Therefore, the good performance in sales promotion activities such as shopping festival at the end of the year also proves the recovery potential in the future.

According to Amazon, 87% of Amazon's own brands are clothing brands. Therefore, from a worldwide perspective, the sales of clothing products is also the main direction of online sales recovery and growth in the future.

Brand order market

In the global market, many well-known international brands will be declared bankrupt in 2020 due to the closure of stores and the change of consumers' consumption concept. The surviving international brands and designers are also facing various challenges. From fast fashion brands, sports outdoor brands to high-end brands, there has been a significant increase in product inventory. Inventory of major brands generally increased above average. The changing consumer market situation, as well as the financial risk of enterprise operation, have changed the order demand and supplier selection of more brands. European and American brands are more inclined to "less batch, more orders and closer convergence". For European brands, in the post epidemic era, Eastern Europe and North Africa have both advantages of geographical advantages and more favorable textile export support policies.

The domestic brand order market also shows a similar trend with the global market. In addition to the "small batch, multi variety" order demand, it requires "rapid response". With the same trend of international and domestic orders, enterprises with sufficient capital or sufficient means of production will have more advantages in the competition.

investment market

In 2020, with the basic elimination of the domestic epidemic situation in the financial market, the domestic economic restart trend is determined, and the monetary policy turns to precision drip irrigation. Under the economic recovery, the overseas epidemic situation will bring export prosperity beyond expectation, and the overall strength will gradually increase. In the whole year, all indexes rose, with Shanghai Composite Index and Shenzhen composite index rising by 14% and 39% respectively. However, the textile and garment industry showed a decline, with a decline of 7.08% in the whole year. Wool textile enterprises in the capital market performance and textile clothing sector consistent, down 9%. The total market value of wool textile listed companies declined slightly, about 1.7% year-on-year. The overall profitability of wool textile enterprises is an important factor affecting the flow of funds.

According to the survey conducted by the China Maoist Association, in the face of the impact of the epidemic in 2020, enterprises will actively adjust. More than half of the enterprises surveyed said that the new investment in intelligent manufacturing, equipment upgrading, product development, and innovative design are all the directions for enterprises to improve themselves.

export market

In 2020, in addition to ASEAN, the total import volume of wool processing products in several major domestic markets: Europe, the United States and Japan, will show a decline of more than 30%.

From January to November, the total amount of wool processing products imported from the United States amounted to 2.5 billion US dollars, down 34.9% year-on-year. Among them, imports from China fell 44.8% year-on-year. The share is 28%, which is 4% lower than that in 2019. The EU, India and ASEAN accounted for 27%, 16% and 9% of the total imports of the United States, with a decrease of 32%, 32% and 36% respectively.

Japan imported 1.6 billion US dollars of wool processing products, a year-on-year decrease of 34.2%. Among them, imports from China fell by 40.2% year-on-year, accounting for 40%, a decrease of 4 percentage points over the same period of last year. EU and ASEAN products accounted for 26% and 24% of Japan's total imports, with a decrease of 34% and 29% respectively.

According to the data of China Customs, from January to November 2020, the total export volume of domestic wool textile raw materials and products was 9.33 billion US dollars, a year-on-year decrease of 18%. Among them, the total export volume of wool processing products was 156000 tons, a year-on-year decrease of 24.6%; the total export volume of 4.23 billion US dollars, a year-on-year decrease of 32.4%.

Overall situation of wool textile market in 2020

According to preliminary estimates, the total fiber processing capacity of the wool textile industry in 2020 (excluding sweaters) will be about 1.3 million tons, of which, the wool fiber processing capacity will be about 350000 tons, with a year-on-year decrease of about 18%. It is estimated that the total fiber processing capacity of the wool textile industry will account for 30% to 40% of the world's wool fiber processing capacity. The decline of more than 10% for two consecutive years also challenges the global production situation of wool and other animal fibers.

As of November, the production of some products has returned to the same level in the same period of last year. The cumulative output of wool yarn is 167000 tons, with a year-on-year decrease of 0.01%. The production of woven fabrics remained low throughout the year, with a cumulative output of 270 million meters, a year-on-year decrease of 17.96%.

From January to November, the overall income level of wool textile enterprises above Designated Size reached 114.3 billion yuan, a year-on-year decrease of 8%; the average profit margin was 1.7%, a year-on-year decrease of 1.2 percentage points. In the second half of the year, with the promotion of market recovery and industry adjustment, the overall efficiency of the enterprise has rebounded significantly.

Future market and industry trend

The global textile and clothing consumer market is expected to rebound in 2021. However, the reconstruction of market confidence and consumption is not achieved overnight. It may take several years for consumption level and scale to return to the level before the epidemic. According to Euromonitor's forecast, the global retail sales of textile and clothing will grow by more than 10% in 2021, and it is expected to return to the level in 2019 by 2023.

In the post new epidemic era, the industry and market will also show new characteristics

1. Sustainable thinking will go deeper into consumers' psychology

Affected by the epidemic situation, consumers will pay more attention to long-term planning and tend to think about sustainability. High quality and sustainable products will have the opportunity to attract more consumers.

2. Accelerate regional integration of wool textile industry chain

With the signing of RCEP, China EU investment agreement and other agreements, as well as the continuous progress of bilateral FTA negotiations, wool textile industry chain is expected to further regional integration. According to the current RCEP tariff commitments, in the existing quota of wool imports from China, Australia and New Zealand, all kinds of processed wool products are exported duty-free to most areas of ASEAN, while Japan and South Korea gradually reduce the import of wool products from China.

3. The rise of intermediate product branding is possible

As consumers pay more attention to quality, the unique quality of wool products can be publicized and guided to consumers through the branding of intermediate products. Through more middle brands representing high quality, we can form new "hot money", improve the consumption of wool products and bring new growth.