Textile Market: Weak Downstream Replenishment, Increased Losses Of Mainland Enterprises

Near the end of the year, affected by the unstable market expectations for next year, the operating rate of downstream textile mills remained low, and other factors, the downstream inventory replenishment was weak, and the cotton yarn sales of textile enterprises continued to slow down this week. Enterprises cut prices and promote sales to varying degrees, but the effect is limited. Inventory pressure is generally high, about one month. Mainland enterprises once again suffered a large area of losses, with limited ability to bear price cuts and strong willingness to support prices. The yarn price fell less than the cotton price within the week. Recently, due to the increased capital pressure, some small and medium-sized textile enterprises have gradually increased their production restrictions. It is expected that this phenomenon will continue before New Year's Day, and some textile enterprises will release their spring holidays in advance. The weekly average price of China's yarn price index this week was 21228 yuan/ton, down 42 yuan/ton from last week. Over the same period, the price of outer yarn also fell slightly, and the difference between the weekly average price of outer yarn and that of outer yarn narrowed slightly - 782 yuan/ton.

The spot price of polyester staple fiber continued to rise last week. The futures price of crude oil continued to rise, forming a strong cost support for staple fiber. At the same time, due to the decline in prices last week, traders' willingness to make up stocks at bargain prices was strengthened. This week, it rose in shock driven by both costs and demand. The supply of viscose staple fiber manufacturers remained high, the inventory level of each factory was low, and the negotiated price of domestic mainstream sources was around 18000 yuan/ton. The current market cost support still exists, the demand side performance is flat, and the future market is expected to change little.

Macroeconomy

[The Politburo meeting first proposed unconventional countercyclical regulation, and re proposed moderate easing] The Political Bureau of the CPC Central Committee held a meeting on December 9 to analyze and study the economic work in 2025. The meeting pointed out that we should implement more active and promising macro policies, expand domestic demand, promote the integrated development of scientific and technological innovation and industrial innovation, stabilize the property market and the stock market, prevent and defuse risks and external shocks in key areas, stabilize expectations, stimulate vitality, and promote the sustained recovery of the economy. The meeting pointed out that next year, we should implement more active fiscal policies and moderately loose monetary policies, enrich and improve the policy toolbox, strengthen unconventional counter cyclical regulation, play a good policy "combination punch", and improve the forward-looking, targeted and effective macro-control.

[The Central Economic Work Conference sets the tone for next year's economy] The Central Economic Work Conference was held in Beijing from December 11 to 12. The meeting pointed out that the adverse impact of the current changes in the external environment has deepened, and China's economic operation still faces many difficulties and challenges, mainly due to insufficient domestic demand, difficulties in production and operation of some enterprises, pressure on people's employment and income increase, and many risks and hidden dangers. The meeting stressed the need to implement a more proactive fiscal policy and moderately loose monetary policy. We will give full play to the dual functions of monetary policy instruments in terms of both aggregate and structure, cut reserve requirements and interest rates in due course, and maintain sufficient liquidity, so that the growth of social financing scale and money supply matches the expected goals of economic growth and overall price level. We will keep the RMB exchange rate basically stable at a reasonable and balanced level.

[Export growth slowed down in November] Data released by the General Administration of Customs on December 10 showed that in the first 11 months of this year, China's total import and export value of goods trade was 39.79 trillion yuan, up 4.9% year on year, including 23.04 trillion yuan of export and 16.75 trillion yuan of import, up 6.7% and 2.4% year on year respectively, and the overall operation of foreign trade was stable. In November, imports and exports were 3.75 trillion yuan, up 1.2% year on year. Among them, export increased by 5.8% and import decreased by 4.7%. Under the influence of a series of factors such as geopolitical conflict, increased uncertainty and instability, the growth rate slowed down compared with that of last month, but monthly import and export still maintained growth for eight consecutive months.

[US November CPI rose 0.3% month on month] Data released by the US Department of Labor on the 11th showed that the US consumer price index (CPI) rose 0.3% month on month in November, 0.1 percentage points higher than that in October. Up 2.7% year on year. Excluding the volatile food and energy prices, the core CPI in November increased by 0.3% month on month and 3.3% year on year, both of which were the same as the previous month, but the year-on-year increase was higher than the long-term target of 2% set by the Federal Reserve Board of the United States. Analysts pointed out that the latest inflation data may prompt the Federal Reserve to continue to cut interest rates at the December monetary policy meeting.

　　 Looking forward to the future

From the perspective of the operation of the external market, the latest US inflation data in the international arena met expectations, but reflected the stagnation of the downward trend. Although the probability of the Federal Reserve's interest rate reduction increased significantly in December, the rising inflation pressure will make the path of interest rate reduction unclear after Trump officially wields the tariff stick next year. The two major domestic meetings set the tone that next year we will implement more proactive fiscal policy and moderately loose monetary policy, cut reserve requirements and interest rates at the right time, and maintain sufficient liquidity, which is basically in line with expectations of all parties. Relevant comments indicate that in addition to the policy "scale", it is more necessary to understand the deep logic changes. The specific measures still need to be clarified.

From the perspective of international market operation, the latest USDA report did not increase China's output. The overall output increase was larger than consumption, and the direction was empty, and there was still room for further increase. On the demand side, the contracted volume of American cotton has a limited growth in the process of price decline again, so we need to wait and see the subsequent signing. The overall supply and demand easing situation is difficult to reverse, and the fund position also reflects the lack of single driving force for the current node increase.

From the perspective of the operation of the domestic market, the Politburo meeting of the Central Committee of the Communist Party of China (CPC Central Committee), after 14 years, recalled that the monetary policy was moderately loose, and it was still possible to cut interest rates and reserve requirements in the future, so the liquidity was generally abundant. The fiscal policy will also be more active and promising. However, the market is still uncertain about the specific strength of the policy measures, which is difficult to boost temporarily because of the obvious increase in supply pressure, the weakening of demand side market confidence, and the fact that at the end of the year, enterprises' demand for de stocking and realization increases downward pressure on prices. The market is expected to continue to operate weakly.