Since the beginning of this year, a new round of epidemics has occurred, the situation between Russia and Ukraine has escalated, commodity prices have fluctuated violently, and inflation has been high. World economic growth has faced multiple risks. Driven by the effect of stabilizing growth policies, the domestic macro-economy operated smoothly in the first two months. From March to April, the domestic epidemic continued to spread, the industrial and supply chains were not functioning smoothly, and consumer demand in the textile market was sluggish. Since May, as the domestic epidemic prevention and control situation has generally improved, the effects of various policies to stabilize growth have gradually emerged. Enterprises have resumed work and production in an orderly manner, and revenue and exports have continued to grow year-on-year, demonstrating the strong performance of the cotton textile industry. Develop resilience and resilience to risk.
Production is advanced in an orderly manner
Tracking data from the China Cotton Textile Industry Association shows that the utilization rate of spinning and weaving equipment of tracking companies in the first half of this year dropped significantly compared with last year. Overall, the equipment utilization rate of cluster enterprises, which are mainly small and medium-sized enterprises, has basically remained at around 70%. The equipment utilization rate of key enterprises is better than that of cluster enterprises, and the utilization rate of spinning equipment is higher than that of weaving. The cumulative yarn output of key enterprises tracked fell by 2.4% year-on-year. The year-on-year performance of cloth output was relatively better than that of yarn output, which is related to the fact that the base of cloth output was lower than yarn output in the same period last year. The cumulative year-on-year decrease of yarn and cloth output of cluster enterprises was 2.9% and 2.4% respectively. The terminal market continues to be deserted, downstream orders have decreased, the market has a strong wait-and-see mentality, and yarn and cloth sales have shrunk, with cumulative year-on-year decreases of 4.9% and 1.2% respectively. Inventories of yarn and cloth continue to increase, and the inventory levels of most companies are at a high level, with some companies having yarn and cloth inventories exceeding two months.
Raw material prices fluctuate significantly
Enterprises gradually adjust product structure
Cotton prices. Since the beginning of this year, as of mid-June, domestic standard-grade cotton prices have continued to fluctuate at a high level in the range of 20,000-23,000 yuan/ton (the highest level in the past decade). In late June, as the market’s concerns about the U.S. economic recession intensified, U.S. stocks and commodities Commodity prices closed sharply during the sell-off. International cotton prices continued to plummet. Coupled with Xinjiang-related issues and sluggish downstream consumption and other factors, domestic cotton prices subsequently entered a downward channel. On June 30, the price fell to around 18,000 yuan/ton, which was lower than at the beginning of the year. down 17.8%. The price difference between domestic and foreign cotton fluctuated violently. Since March, international commodity prices have risen rapidly, and international cotton prices have strengthened. Starting from late March, international cotton prices have exceeded domestic cotton prices, and the price difference between domestic and foreign cotton prices has continued to invert, with the highest value exceeding 6,700 yuan/ton.
Staple fiber prices. The prices of viscose staple fiber and polyester staple fiber have increased significantly. Supported by rising production costs and good pre-sales, the price of viscose staple fiber increased. At the end of June, the price of viscose staple fiber increased by 25.1% from the beginning of the year; polyester staple fiber increased by 20.8% from the beginning of the year. However, in the first half of this year, the average price difference between cotton, viscose staple fiber and polyester staple fiber was at a historical high, with the average price difference from January to June reaching 8,137 yuan/ton and 13,938 yuan/ton respectively. At the same time, judging from yarn sales, the sales of purified fiber yarns and blended yarns are generally better than those of pure cotton yarns. Due to Xinjiang-related issues, companies have gradually adjusted their product structures, increased the use of non-cotton fibers, and produced differentiated products.
Economic efficiency continues to be under pressure
Revenue and exports still maintain growth
Faced with sharply fluctuating raw material prices, weak demand, and high inventories, the economic benefits of cotton textile companies continue to be under pressure. In the first half of this year, the operating income of key tracking enterprises increased by 5.7% year-on-year, and the growth rate dropped by 0.6 percentage points from January to May; the export delivery value increased by 6.9% year-on-year, and dropped by 2.3 percentage points from January to May; total profits increased by 2.3 percentage points year-on-year. It fell by 19.0%, a decline that expanded by 4.1 percentage points from January to May; the loss was 32.5%, an expansion of 3.5 percentage points from January to May, and a year-on-year expansion of 15.0 percentage points.
The prosperity index continues to be below the boom-and-bust line. The cotton textile prosperity index in June was 46.57, down 2.07 from May. From the perspective of sub-indices, the seven indexes that make up the China Cotton Textile Prosperity Index (raw material procurement, raw material inventory, production, product sales, product inventory, business operations, business confidence) are all below the boom-and-bust line, and have further declined from May. It shows that the industry is in a bad state.
The international environment is severe and complex
Domestic market is expected to rebound
In the first half of the year, in the face of complex environmental changes at home and abroad, the cotton textile industry actively responded by increasing the application of non-cotton fibers, improving the level of continuity, automation and intelligence of production, cultivating internal skills, and overcoming various difficulties that affected the production and operation of enterprises. Move forward under pressure. Looking forward to the second half of the year, in June 2022, the World Bank lowered its global economic growth forecast for 2022 to 2.9%. The international environment remains severe and complex, affected by unexpected changes in global inflation and geopolitical tensions.�As a result of the prolongation of the crisis and the accelerated tightening of monetary policy by the Federal Reserve, global economic growth has declined. However, since June, China’s economic resilience has been demonstrated and more positive factors have emerged. With the implementation of a package of fiscal, monetary, industrial and supply chain policies to stabilize growth, China’s economy is expected to give full play to its advantages of resilience, great potential, and wide space in the second half of the year, achieving a quarter-by-quarter growth rate recovery, and domestic market demand is expected to increase. At the same time, the Regional Comprehensive Economic Partnership Agreement (RCEP) will further strengthen trade cooperation between my country’s cotton textile industry and ASEAN, Japan and South Korea. The “Golden Nine and Silver Ten” are coming soon, and we look forward to a turnaround in the market.