In mid-October, due to the continued spread of the new coronavirus epidemic in India, many large Indian export-oriented textile companies were unable to guarantee normal delivery. Therefore, a large number of clothing and textile orders were transferred to China, which once promoted the long-awaited decline in the Chinese textile industry. of prosperity.
At the same time, textile manufacturers such as Myanmar and Cambodia have transferred orders to China. According to market information, data obtained from Alibaba International Station, the largest online foreign trade platform in China, shows that , starting in May, the number of orders for fabrics and textile raw materials in China has increased by more than 100%; the number of orders in the clothing industry has increased by more than 200% year-on-year, and the clothing industry has achieved a three-fold increase in July.
Can such a wave of order transfers become an inflection point for my country’s textile industry and polyester industry? ICIS believes that due to the ongoing global epidemic, textile and apparel consumption has plummeted, the mid- to long-term prosperity of the textile industry is expected to remain sluggish, and polyester raw materials continue to be under pressure.
The proportion of finished goods inventory in total inventory continues to be higher than 50%
The trend destocking cycle has not yet arrived
China, as the world’s major textile and apparel exporter, has experienced rapid economic recovery after the domestic epidemic was brought under control, and China has assumed the role of “supplier” of global textile products.
Data from the General Administration of Customs of China show that since August, China’s textile exports have continued to grow positively and achieved an 18% growth rate in September. However, domestic textile sales account for about 75% of China’s textile and apparel output value. Even if exports recover, the performance of the textile industry remains sluggish amid weak domestic demand.
Currently, the cumulative added value of China’s textile industry continues to show negative year-on-year growth, and the inventory of textile finished products is still growing rapidly, and the inventory of finished products accounts for more than 50% of the total inventory. This number has averaged only 40%-45% in the past.
It can be seen that China’s textile industry is still facing great inventory and financial pressure, and the trend of destocking has not yet arrived.
Source: CEIC
Emotions drive, fundamentals are difficult to improve
Review the truth after the price increase of polyester filament
Review the last wave of Indian textile order transfers. This transfer trend began to take shape in mid-September, when the textile industry began stocking up. After the National Day and the resumption of work, orders increased significantly, which once caused a rush for goods in the market. As a result, the price of a single ton of polyester increased by about 400 yuan within half a month. However, in fact, the increase in polyester prices comes more from the improvement in sentiment, while the improvement in fundamentals is still limited. It is difficult for polyester prices to rise in a trend in the long term.
The reason is that the main products returning textile orders from India and other Southeast Asia are cotton textiles, not polyester products.
According to research, the order status of most companies in textile and garment production bases in Jiangsu, Shandong, Guangdong and other places has improved significantly compared with the first half of the year, and orders for some companies have surged.
Individual manufacturers in Shengze, Jiangsu, said that due to the epidemic, some Indian textile orders were indeed transferred to China, mainly towels, bed sheets and other home textile orders, from Keqiao It can be seen from the textile prosperity index that since September, there has been a significant scissor difference between the polyester fabric prosperity index and the pure cotton fabric prosperity index, and the polyester fabric prosperity index is still weak.
Source: China Keqiao Textile Index
Indian manufacturing industry accelerates recovery
Limited order sustainability in the later period
In addition, since August, the marginal impact of the Indian epidemic on the Indian economy has gradually weakened. As it gradually resumes work and production, textile orders transferred to China in the later period may be limited. Judging from India’s manufacturing PMI, it recovered to above 50 in August and 56.8 in September.
This can also be confirmed from Google mobile big data. It can be seen that mobile signals in Indian workplaces have increased. Although it has not yet returned to before the epidemic, the overall situation is improving. This can also be proven from the export data to the United States. Therefore, overall, India’s manufacturing industry is in the process of accelerating recovery, and textile orders transferred to China in the later period have limited sustainability.
According to news from the Shengze area, the current transaction growth rate of the fabric market has slowed down. Although manufacturers have many orders on hand to execute, the destocking speed is slowing down. At present, the inventory in Shengze area is about 40 days, and the operating rate continues to remain at a high level of 80-90%. At the same time, the recovery of the foreign trade market is not as good as expected, and market confidence has also dropped slightly. Textile enterprises also have certain concerns, so they adopt a market-watching approach for raw material procurement. A strong atmosphere and a make-to-order business strategy.
Preliminary launch of 1 million tons/year production capacity
Polyester filament may face rising inventory and price pressure
Therefore, the supply pressure of polyester filament continues to be great. Polyester filament yarn inventory did decline in mid-October as the market replenishment cycle began, but from the highest of 31.The drop from 5 days to 23 days then stopped abruptly and started to rise again.
The current polyester filament inventory is 25 days, still at the highest level since records began in 2015. At the same time, due to the high prosperity of the polyester industry in the past two years, leading polyester companies have already planned to build new production capacity, and this year will be the peak of production.
According to market information, there will still be about 1 million tons/year of polyester filament production capacity ready to be launched in 2020. ICIS expects polyester filament inventories to continue to rise at the end of the year.
Source: ICIS Price Forecast Report
In the short term, although the current polyester filament market price has dropped, with the support of positive terminal demand, the overall performance is still strong. Entering November, the main focus is on the preparation of clothing and home textile e-commerce companies for “Double Eleven”. Immediately after the “Double Twelve” arrival, there may be another wave of replenishment orders, and the order volume is still likely to increase.
In addition, as the temperature drops, the demand for cold-proof clothing fabrics will drive up the market atmosphere, and prices will rise by then. However, the supply pressure of the raw material market still exists, and the cost-side support is insufficient, so the price The overall increase will not be too large.
Starting from mid-to-late term, with the arrival of the off-season for purchasing, prices will also weaken. In the future, we need to pay attention to the raw material market and foreign trade situation.
At the same time, looking forward to 2021, according to the ICIS supply and demand database, China’s polyester effective production capacity will grow by about 5.5%. With the continuous recurrence of the epidemic, clothing consumption is expected to be difficult to improve next year. The polyester industry next year may remain in surplus.
In addition, upstream raw materials are also at the peak of production. The effective production capacity growth rates of PX, PTA, and ethylene glycol next year will be as high as 11%, 16%, and 17% respectively, and supply pressure is also relatively high. It is large, so it is difficult to support polyester on the cost side.
Therefore, with global textile and apparel demand weak and the entire industry chain continuing to release production capacity, ICIS predicts that polyester prices will continue to hover at a low level of US$800 to US$900/ton next year. .
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