As of March 3, 2021, the price of cotton futures is 16,385 yuan per ton. Starting from the low point in the first half of last year, it has risen by about 60% so far.
What impact will such a huge increase in a short period of time have on the textile industry? Will the prices of cotton products such as socks and towels purchased by consumers be affected by this?
The price of cotton and other raw materials soared
The cost of textile companies has risen by nearly 30%
In a yarn factory in Shaoxing, Zhejiang, the reporter saw tons of lint cotton being dyed in the machine. After dyeing, this batch of cotton will be processed into yarn and sold to downstream fabric garment factories.
Factory director Ji Guomiao told reporters that the biggest problem facing enterprises at present is that the price of raw material cotton has been rising.
Ji Guomiao told reporters that since yarn companies take orders first and then produce, it is difficult to modify the shipping price after the contract is signed, and the continuous increase of raw materials during this period will lead to a substantial increase in costs and reduce the company’s profitability. . In addition, the high yarn prices also make it difficult for downstream fabric factories to accept.
Ji Guomiao, Chairman of Zhejiang Shaoxing Jimalangsi New Material Co., Ltd.: Raw material prices have risen by 20%, and our prices have risen by more than 15%.
As cotton has been rising, yarn prices have also been rising. As of March 3, the main cotton yarn price of ZCE was RMB 24,235 per ton, which is more than 30% higher than the April 2020 low.
The reporter learned that yarn companies have begun to increase their stocks of cotton. However, due to more cotton storage requirements, the company’s inventory increase is limited.
In addition, the price of textile raw materials such as spandex has also risen sharply, which has also led to the further increase in the cost of yarn downstream fabric factories.
Industry insiders told reporters that although the current increase in yarn prices has caused downstream fabric factories and garment factories to have a wait-and-see mood. However, due to the saturation of downstream orders, the price increase of upstream raw materials will eventually be transmitted to the downstream, and the prices of fabrics and clothing will also rise together.
Yarn companies are profitable
What caused the cotton price to rise so much? Will the increase in cotton be caused by the increase in downstream demand?
From the second half of 2020, the price of cotton began to rise rapidly. As far as yarn companies are concerned, although profits have decreased with the rise in cotton prices, the continued increase in orders has made the company’s profitability still good.
The reporter learned that the current production orders of textile companies are generally scheduled to April and May, and a large number of companies use 24-hour operation, and people rest and machines do not rest. Although the profit margin has fallen, the overall profit is still good.
Industry insiders told reporters that the increase in domestic cotton prices is due to the increase in demand. Due to the saturation of orders, domestic textile companies are actively purchasing raw materials. At the end of January, the national textile companies’ inventory of the cotton industry in the library was 930,500 tons, an increase of 126,200 tons from the end of the previous month and an increase of 204,000 tons from the same period last year. On the other hand, the speed of yarn sales is accelerating. As of February 25, the number of days for the inventory of finished yarns of textile enterprises was 10.6 days, a year-on-year decrease of 56.7%.
The price of cotton products such as clothing and towels may rise by 10%
Since the price of raw materials in the cotton textile industry chain has risen so sharply, will the price of cotton products also rise sharply? Will the prices of towels and socks and other textiles that are purchased daily increase significantly?
During the interview, the reporter learned that affected by the epidemic this year, not only orders for yarn and fabrics were transferred from Southeast Asia to China, but even the clothing and cotton products industry also experienced backflow of orders.
In December 2020, China’s textile and apparel exports were US$26.2 billion, an increase of 7.2%, of which textile exports were US$12.29 billion, an increase of 12.7%, and clothing exports were US$13.91 billion, an increase of 2.7%. From January to December 2020, China’s textile and apparel exports totaled US$291.22 billion, a year-on-year increase of 9.58%.
However, the reporter learned that compared with the explosive growth of export orders, the current domestic consumer orders have only returned to the level before the epidemic, and the domestic demand for cotton textiles has not seen a significant increase.
Shi Lei, Chairman of Zhejiang Zhuji Jieliya Textile Group: The annual output of towels is about 30,000 tons, and the monthly output is 2,500 tons. The current production is relatively saturated, starting in May 2020, it basically reached the previous year’s production volume. Excluding the rest, the production capacity reached a normal level in January.
The reporter learned that although the price of domestic cotton products will increase with the increase in cost. However, since the raw material cotton to yarn to fabrics and finished products, the proportion of cotton and other raw materials in the cost of each link in the upstream and downstream of the textile industry will decline, so the final price increase will not be as high as the price increase of raw materials. Big.
Shi Lei, Chairman of Zhejiang Zhuji Jieliya Textile Group: The price of raw materials may have risen by 60%, but when it comes to finished towels, the increase is about 10%. An ordinary towel is 100 grams, and the ex-factory price is generally 13 yuan. If it is to increase by 10%, it will be more than 1 yuan.
Industry insiders told reporters that the gross profit margins of domestic apparel companies that do wholesale goods are generally low. Therefore, the price of raw materials rises too quickly in a short period of time, which will increase the price of clothing. The larger impact will be clothing priced at around 80 yuan. At present, the gross profit margin of many brand clothing generally exceeds 50%. Therefore, the price increase of raw materials has little effect on the cost of this type of brand clothing, and the selling price of many brand clothing will not change significantly.