Market Dynamics: Weak Peak Season, Weaker Slack Season, Profit Squeeze In Textile Industry

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For most of this year, overseas yarn mills were in a loss state. After the cotton price fell, the spinning profit was repaired to a certain extent. The operating rate of overseas yarn mills continues to decline, and the phenomenon of high operating rate in peak season has not been seen. At present, new cotton has not been listed in large quantities. From the feedback from the downstream of cotton yarn, external orders led by Europe and the United States are missing. The original market expectation of "nine gold and ten silver" has not appeared. Domestic demand grows slowly, weaving maintains balance, clothing orders are few and scattered, and the profit of the textile industry is squeezed.

From January to September, the accumulated retail sales of clothing textiles in China reached 993.52 billion yuan, up 10.6% year on year. The retail sales in September were 113.93 billion yuan, up 9.9% year on year. As of October 20, spinning spot profit was 680.3 yuan/ton, up 595.7 yuan/ton month on week; The operating rate of the spinning mill was 70.2%, and the peripheral ratio decreased by 1.5 percentage points. As of the beginning of October, the production and sales rate of grey cloth was 98.4%, down 3.3 percentage points month on month, and the inventory was 44.4 days, up 2.8 days month on month.

From January to August, the industrial added value of textile enterprises above designated size decreased by 2.8% year on year, the operating revenue decreased by 4.2% year on year, and the total profit decreased by 12.1% year on year; The output of yarn, cloth and clothing of enterprises above designated size decreased by 1.7%, 4.6% and 10.3% respectively year on year, while the output of chemical fiber increased by 6.9% year on year.

The support of demand for price is weak, and there is still no substantial improvement in the peak season. At present, downstream consumption has declined again after a short recovery. The peak season is nearing the end, and the confidence in the future market is insufficient. The textile enterprises in the second half of the fourth quarter may once again face the dilemma that the peak season is not prosperous and the slack season is lighter.

In August 2022, China's textile and clothing exports reached US $30.976 billion, up 2.88% year on year. Among them, the export volume of textile yarn, fabric and products was US $12.49 billion, down 0.23% year on year. The export of clothing and clothing accessories reached US $18.486 billion, up 5.10% year on year. By the end of August this year, China's textile and clothing exports had totaled US $220.303 billion, up 10.98% year on year, of which the textile exports totaled US $102.268 billion, up 10.24% year on year; The accumulated export volume of clothing was 118.034 billion US dollars, up 11.62% year on year. In 2021/2022, China's textile and clothing exports totaled US $337.753 billion, up 11.63% year on year, of which the textile exports totaled US $154.871 billion, up 9.13% year on year; The accumulated export volume of clothing was 182.882 billion US dollars, up 13.84% year on year.

This year, the import price dropped and the import volume increased. The import quota was 970000 tons, and the import beyond the quota increased, higher than the expected 500000 tons. The sliding tax quota of 750000 tons was issued.

From January to September, China imported 1.1 million tons of cotton, down 360000 tons year on year; In September, China imported 240000 tons of cotton, up 60000 tons month on month, a new high in recent years. From January to September, China imported 1.21 million tons of cotton yarn, up 250000 tons year on year; In September, China imported 180000 tons of cotton yarn, down 10000 tons month on month.

In September, the export of textile and clothing fell 6.5% year on year, 3.7 percentage points lower than that of last month. Among them, textile exports were US $11.64 billion, down 3.4% year on year and 0.5% month on month, while clothing exports were US $14.56 billion, down 8.8% year on year and 10% month on month. From January to September, textile and clothing exports totaled US $223.148 billion, down 10.15% year on year. In September, exports were worth US $26.196 billion, down 6.61% year on year.

Before May, the price of domestic and foreign cotton was inverted, and the import volume was low, which promoted the domestic de stocking. After May, the profit margin of imported cotton and imported yarn was gradually opened. The sliding tax import quota was issued in September, and the import cotton volume in August increased by more than 60% month on month. The import sliding tax quota of 750000 tons has also been issued, and there is no limit on the trade mode. In the coming months, the domestic cotton and cotton yarn import volume is expected to be large.

By the end of September, the commercial inventory of cotton had reached 1.3146 million tons, down 316000 tons month on month and 615500 tons year on year. Commercial cotton stocks were at the lowest level in the same period in history. As of October 20, the number of warehouse receipts of Zheng Mian was 2862, and the effective forecast was 68, totaling 2930, down 633 from last weekend. As of October 20, the raw material inventory days of textile enterprises were 16.86 days, down 1.41 days month on month. The inventory of finished products of textile enterprises was 30.56 days, up 0.71 days month on month.

According to Mysteel data, as of October 6, the total commercial inventory of cotton was 917000 tons, 14000 tons less than last week. Among them, 392900 tons of commodity cotton were produced in Xinjiang, and 27000 tons were reduced in the surrounding area. The commodity cotton in the mainland was 225100 tons, flat on a weekly basis. As of September 28, the inventory of imported cotton at major ports decreased by 0.3% on a weekly basis, with a total inventory of 286000 tons. The number of yarn inventory days of the yarn mill was 26.4 days, which was the same month on month; The startup rate was 72.3%, which was the same month on month; The days of cotton discount and storage of textile enterprises were 25.5 days, which was the same month on month. The operating rate of downstream textile mills was 42.8%, which was the same month on month. The inventory days of finished products were 30.01 days, compared with 29.28 days in the previous week; The order days of textile enterprises are 13.85 days, and the previous value is 14.95 days.

In the downstream, there is no obvious increase in peak season, and the purchase is mainly for rigid demand. Downstream profits declined, orders were poor, and startup gradually declined. With the sales and overweight of national reserve cotton, the supply was sufficient. After the listing of new cotton in the fourth quarter, the stock accumulation continued, and the supply pressure would gradually appear.