Flame retardant fabric_Flame retardant fabric_Cotton flame retardant fabric_Flame retardant fabric information platform Flame-retardant Fabric News The energy crisis is superimposed on inflation, and the “involution” of the industry is intensifying. Are there “dangers” and “opportunities” amid these difficulties?

The energy crisis is superimposed on inflation, and the “involution” of the industry is intensifying. Are there “dangers” and “opportunities” amid these difficulties?

Compared with previous years, orders from South America dropped by approximately 30% to 40% in the first nine months of this year. “The main reason is the imbalance between s…

Compared with previous years, orders from South America dropped by approximately 30% to 40% in the first nine months of this year. “The main reason is the imbalance between supply and demand. There are too many suppliers in the textile industry. In addition, the epidemic has affected foreign tourism for three years, and their economy is not particularly good. The price of crude oil is also rising, so the overall purchasing power has dropped.” Fu Qi Textile Lin Xi said.

Energy crisis superimposes inflation, where will Chinese enterprises go?

The disappearance of European and American demand. Foreign customers have energy problems, and the overall economic environment is like this. Although clothing is indeed a necessity, compared with food and energy, it is not that important. After the outbreak of the Russia-Ukraine conflict, Russia’s natural gas shipments to Europe decreased, Europe’s electricity and heating were tight, and energy prices soared, driving up commodity prices. As a result, consumer demand in Europe and the United States has been suppressed.

A recent report from Morgan Stanley pointed out that many companies are facing excess inventory. A Morgan Stanley shipper survey of about 100 companies showed that order volumes were down 40% year-on-year. In September, U.S. container imports fell 11% year-on-year.

Non-essential consumption decreased, and risks in textile orders emerged. The declining trend of overseas textile orders is confirmed in China’s export data. Customs data shows that since the beginning of this year, the export value of textile yarns, fabrics and their products has dropped significantly: a year-on-year increase of 23.9% in January, and by September, the single-month growth rate dropped to 1.8%.

In China, it takes at least 60 to 90 days for textiles to be customized, yarn, fabric, printed and dyed, and ready-made garments, and the goods have to float on the sea for more than a month, or even two or three months, before reaching the European market. It stands to reason that Chinese companies are already accepting orders for next year. However, giant companies such as Adidas, Nike, and Under Armor are reducing demand. Therefore, many companies are facing difficulties in receiving orders.

Clothing companies are also feeling the decline in orders. The general environment has a great impact, and orders have indeed shrunk a lot. On the other hand, domestic labor costs are too high, and many customers transfer orders to Myanmar, India, and Bangladesh. From e-commerce and garment factories to textile factories, fabric factories, yarn factories, and dye factories, China’s textile industry is in a slump this year. To some extent, this may indicate a decline in China’s textile export data in the first half of next year (2023).

The biggest obstacle to exports is not the inconvenience of transportation to customers during the epidemic; it is not the emerging economies taking away Chinese textile orders; it is the sluggish global consumption and the disappearance of demand.

The special trade game between China and the United States is not enough to explain the decrease in textile export orders. In Southeast Asia and South Asia, which are free from this problem, textile orders are also declining sharply. The domestic textile industry media “CHINA TEXTILE” recently reported that the Indian Andhra Pradesh Textile Association announced that due to an unprecedented drop in demand, approximately 125-135 factories will cease production. Currently, the operating rates of spinning mills in other states in India are between 40% and 60%. In Vietnam, Pham Xuan Hong, chairman of the Ho Chi Minh City Textile and Embroidery Association, said that in the first eight months of this year, Vietnam’s textile and clothing exports reached US$30.1 billion, but this was mainly generated in the first few months of this year. Since July, Vietnamese companies have also faced a series of difficulties such as reduced export orders.

In the final analysis, under the double attack of the energy crisis and inflation, non-essential consumption in developed European and American economies is decreasing.

Data released by the U.S. Department of Commerce on October 14 showed that in September, the seasonally adjusted year-on-year growth rate of U.S. clothing retail sales was approximately 3.1%. After excluding the impact of inflation, it is expected to be negative year-on-year growth (September clothing CPI +5.5% year-on-year). It can be seen that the actual clothing consumption in the United States has been reduced.

Generally, the depreciation of the RMB against the U.S. dollar is seen as a factor that is good for corporate exports. However, not many foreign trade companies are optimistic. First, customers will bargain and lower the price when negotiating. Second, the exchange rate fluctuates too much, and customers will ask to postpone payment, or wait for a more favorable price to appear and delay placing orders. Third, many raw materials in the textile industry are refined from petroleum, which ultimately needs to be imported in RMB. The increase in exchange rate costs will eventually be passed on to domestic suppliers.

Competition and cooperation with Southeast Asia will become a key proposition for China. Although total global demand has decreased, the structure of orders is also undergoing subtle changes. Taking the textile industry as an example, data from the China Chamber of Commerce for Import and Export of Textiles shows that from January to August, the United States imported US$102.14 billion in textiles and clothing, with imports from China accounting for 27.1%, a year-on-year decrease of 3.3 percentage points; imports from Vietnam, India, Bangladesh and The proportion of Indonesian imports increased by 1.7, 0.8, 1.7 and 1 percentage points respectively. ASEAN’s overall supply capacity cannot be underestimated.

Some shortcomings of Chinese industry are being exposed. For example, the textile industry lacks high-tech original fabrics. Secondly, the products of domestic leading textile refining and chemical companies are almost overlapping. China’s refining and chemical projects have huge production capacity and a large supply of materials, but they are still unable to develop the most high-end fabrics. Once the refining and chemical plants of many large textile companies are started, it is difficult to stop them when encountering bad market conditions, otherwise they will face huge restart costs, so they can only force production. Chinese companies are still “involved” in terms of volume.

But at the same time, there is no need to be too pessimistic. On the other hand, Chinese companies still maintain many advantages. China has a comprehensive, complete and efficient industrial system, leading infrastructure, and a developed industrial logistics system.��This is something that Southeast Asian countries will find difficult to catch up in the short term. In addition, China’s labor force is of high quality, hard-working and not as resistant to overtime work as Southeast Asian workers; Chinese companies are highly sensitive to the market and have strong adaptability; foreign companies have not yet cultivated mature middle- and senior-level managers in Southeast Asia, and factory management costs higher. In addition, China’s ultra-large-scale market will continue to consolidate its own industrial chain and supply chain advantages.

Now, every company must have a sense of urgency, develop customers through multiple channels, actively go out to respond to market changes, accumulate more “food”, and use more cash flow to cope with crises.

Difficulties occur every year, and they are different every year. Every year, companies close down and new ones are added. There will always be a market. It depends on how entrepreneurs view crises. Only when there is a crisis will there be opportunities.

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Author: clsrich