Affected By The International Situation, Cotton Textile Enterprises Need To Upgrade Their Industries

In the past two years, the financial attributes of cotton have increased, the price has been weakened by the impact of fundamentals, the trend of macro pricing has become more obvious, and the volatility of price has been significantly strengthened. In order to avoid losses caused by frequent fluctuations in cotton prices, and due to the cautious view of future demand, the willingness of downstream enterprises to place long orders has been significantly weakened. Therefore, for cotton spinning enterprises, the order based production mode can better adapt to the current market situation. In addition, due to the diversification of products and the influence of differentiated demand, the production based on sales can better meet the market demand and the production arrangement of enterprises. Therefore, enterprises are more inclined to purchase cotton when it is needed, and purchase on the basis of ensuring normal production, so they are not willing to stock up.

Enterprises generally feel that the situation of external demand is not very optimistic. First of all, due to the limited sales of Xinjiang cotton products in some regions, the orders exported to the United States and Europe since 2021 have been adversely affected. Secondly, with the impact of high inflation and high inventory since October last year, external demand has continued to weaken. Third, influenced by the interest rate increase in the United States, the dollar has strengthened, while the currencies of other countries have depreciated and their purchasing power has declined, resulting in a decline in export orders. In the middle of March, the orders of several enterprises were about the end of April, and foreign customers were not willing to place orders. Although they recovered from the previous year, the gap between the orders of the same period in previous years was about one month.

Affected by the weakening of foreign demand, the trend of forcing enterprises to switch from export to domestic sales is more obvious. Many enterprises have expressed their willingness to switch from export to domestic sales and have begun to expand the domestic market. But the obvious fact is that the domestic market demand is very limited. Even if it can digest some of the demand, it is far from making up for the lost foreign demand, which still plays an important role for cotton textile enterprises. The main reason is that, first, there is a certain gap between China's consumption habits and those of Europe and the United States. The Chinese people advocate thrift and less consumption of cotton textiles. On the other hand, the preference for products is also different. For example, European and American people prefer solid colors and pay more attention to comfort, while Chinese people may prefer products with bright colors. Changing the market of products in a short time may also involve changing product styles and other issues. In addition, many enterprises turn to the domestic market in a short time, regardless of whether the product demand has been substantially improved, which will inevitably lead to more intense market competition. Participating in the "internal volume" of the domestic market is not a good way to increase demand.

Affected by the cotton price inversion and the decrease of foreign orders, some enterprises also adjusted the proportion of cotton used by enterprises, reduced the proportion of imported cotton, and increased the proportion of cotton used in Xinjiang. For some foreign trade enterprises that still target Europe and the United States, although Xinjiang cotton has price advantages, it is still restricted by product sales and mainly uses imported cotton. In addition, different markets have different requirements for cotton use. For example, the Japanese market has a high degree of recognition for Xinjiang cotton products, plus cost advantages, and tends to use Xinjiang cotton. Therefore, for enterprises, customer demand also makes enterprises consider the impact of different regions when using cotton.

For the industrial transfer of enterprises, the planning of each enterprise is different. Some enterprises mainly engaged in foreign trade had adopted the enterprise strategy of industry outward transfer five years ago or even more ago. The main destination of the transfer was Southeast Asia, mainly Vietnam, which was mainly affected by lower labor costs, more preferential taxes, and less restricted product sales. This part of enterprises has an obvious trend of outward transfer. However, some enterprises do not intend to move outward, mainly because of poor industrial chain perfection abroad, employment of domestic residents, large state-owned social responsibility of enterprises and other problems. This part of the enterprise market is more likely to turn to domestic or other regions with loose requirements.

Affected by weak demand, high supply pressure and other factors, cotton textile enterprises generally reflect that their operating profits are relatively weak, some enterprises have entered a loss stage, and even some small-scale enterprises have abandoned the cotton textile industry to produce other commodities. Profit is the core of enterprise operation. The weakness of profit reflects the fierce contradiction between supply and demand in the cotton textile industry. In terms of supply, raw cotton increased production, while downstream demand was weak, which increased the pressure on cotton sales, and the stock of many warehouses rose. In terms of demand, the demand from bottom to top is cautious, and it is difficult for the demand to improve substantially in the first half of the year. On the whole, the profit situation of cotton textile enterprises will remain weak in a short time.

In a word, the current operation of cotton textile enterprises faces certain challenges due to the impact of unstable factors such as the international situation, inflation, the decline of global consumption capacity and the change of consumption patterns. In order to cope with the impact of weakening demand, enterprises have adopted various means such as outward transfer, market transformation, production of differentiated products and coupled development with related industries. These initial signals also reflect the development trend of cotton textile enterprises in the future to a certain extent, and will be the focus of cotton textile enterprises and even textile enterprises in the future.