Not long ago, on a social platform, a textile person started a discussion on the topic of “Proving in one sentence that the textile business is not easy to do”. It sparked a lot of heated discussions at once, and there were even more divergent opinions in the comment section.
“Originally, the customers who came to my place to place orders were to grab a share, but now customers are asking if they want to leave some share for me this quarter!”
“It turned out that our fabrics were sold before they even came off the machine. Now our fabrics have piled up!”
“Originally we didn’t cut samples, but now we even cut hand samples!”…
Supply and demand are out of balance, and overcapacity is the original sin
First, let’s look at a set of data.
According to statistics from the China Filament Weaving Association, as of the end of 2022, the scale of looms in my country’s filament weaving industry reached 836,000 units, including 770,000 water-jet looms, a year-on-year increase of 5.48%. Driven by industrial migration, the production capacity of water-jet looms has experienced explosive growth, with the number exceeding one million units just around the corner.
Not only is the number of machines increasing significantly, but what is even more frightening is that the speed of the looms is also increasing. Data show that my country’s total output of chemical fiber filament fabrics will reach 59.5 billion meters in 2022, a year-on-year increase of 6.82%.
Let’s talk about orders. In the first half of the year, the shortage of foreign trade orders has become a fact. From January to May 2023, the cumulative exports of textiles and clothing were 812.37 billion yuan, an increase of 2.1% over the same period last year, of which textile exports were 390.48 billion yuan, a decrease of 2.4%.
On the one hand, orders are in short supply, on the other hand, production capacity is oversupplied. I would like to ask, can such a high output be absorbed by the downstream? The answer is definitely no!
The market is inherently dominated by buyers, and purchasing power determines the strength of market demand. Since the beginning of this year, the international economic situation is still in a downturn, people’s purchasing power for clothing has declined, and “consumption downgrade” and other situations have occurred one after another. Purchasing power has declined, and demand has weakened, leading to poor overall prosperity in the textile industry.
Under such a difficult model, the difficulty of maintaining orders for textile companies has doubled. A textile boss joked: “I used to run a sales department, but now I work as a teahouse!” How many people can survive on their own in the face of overcapacity?
Volume price volume service, profits are different from the past
Looking back on the first half of the year, the word “internal rolling” appears very frequently in the textile industry. It seems that as long as it can facilitate the placement of orders, anything can be “rolled” into a “roll”, such as roll prices, roll services, roll products… and so on. The profit margins of textile companies can be imagined!
Market research results show that the current orders received by textile companies are generally small in size, concentrated between a few thousand meters to tens of thousands of meters, with occasional orders of hundreds of thousands or hundreds of thousands of meters appearing. What is even more frustrating is that when the order reaches a certain size, negotiating to lower the price has become a routine operation for buyers.
Faced with the multiple-choice question of whether to protect orders or profits, the answers given by textile companies are surprisingly consistent. After all, if you have orders, you can maintain production operations and earn more or less. If you can’t even receive orders, there will be no profit, and even normal production will be difficult to guarantee.
“There are still orders, but it has become more difficult to make money!” This is the voice of the textile bosses. Overcapacity leads to an imbalance between supply and demand, and limited demand cannot match high inventories. In order to compete for orders and effectively withdraw funds from the treasury, low-price competition and price-breaking selling often occur. Some people even issued a declaration that “as long as you don’t get involved in it, you will get involved in it.”
“In the past, we didn’t do any orders that didn’t make normal profits, but now we only order to protect our capital!” This sentence may seem ironic, but in fact it is full of sadness and helplessness.
Postscript:
In this era of overcapacity, textile companies are struggling, and the era of just lying around and making money is gone forever! The road in the future may become increasingly difficult. Making textiles is not easy, but you have to do it and cherish it!
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