Analysts from foreign industry organizations believe that the current global yarn market is generally struggling. Although prices in some areas showed signs of stabilization last week, this may be related to the recent price increase of raw cotton substitute products.
At present, the product inventory of yarn mills is generally higher than the normal level. The improvement in production and sales of Chinese yarn mills a few weeks ago has begun to recede. Epidemic prevention and control continues to put pressure on domestic textile demand, and exports are affected by the Xinjiang cotton ban. . Since China’s textile downstream (knitting and woven) is extremely important to other countries, difficulties in the Chinese market also put pressure on the textile industry in other regions.
In this regard, orders from wholesalers are particularly important. The facts have become extremely clear. Due to over-booking in 2021 and the first half of 2022, textile mills’ inventory of various products has been transferred from the origin to the sales area in large quantities, and cotton is also part of it. Now, wholesalers are focusing on clearing inventory. In the face of global macroeconomic uncertainty, this approach will undoubtedly further increase the market’s concerns about downstream demand. As a result, orders in all aspects of the entire textile industry have come to a standstill.
Judging from U.S. retail sales data, October this year increased by 1.3% month-on-month and 8.3% year-on-year, which is better than market expectations. This may just reflect the impact of inflation on prices, that is, retail sales growth exceeds retail quantity growth, but it does not It truly reflects the decline in market demand. Judging from retail data in October, the retail sales of clothing and clothing peripheral products were basically the same month-on-month, with a year-on-year increase of 3.1%. So if retail demand in the U.S., the world’s largest consumer market, isn’t increasing in volume, why can it remain stable even as the economy continues to decline?
Obviously, if retail consumption remains relatively active in the future (this idea is unrealistic as the Fed continues to raise interest rates), once the current retail inventory is depleted, orders should return to a relatively normal level. The risk and opportunity here is that if the inventory clearance in the middle links of the supply chain is excessive, the entire market will be very sensitive to increased demand, which requires more attention in the future.