Recently, chemical fiber raw materials have experienced ups and downs driven by international crude oil, and the downstream market has also been affected, with some fluctuations.
Faced with this year’s market fluctuations, most textile mills have chosen “safe” production. The so-called safety, in addition to production safety, mainly refers to the safety of inventory and the safety of operations, especially in today’s low demand season. The bosses are even more willing to “cut production and take holidays”!
According to research, some companies have begun to reduce production and operations. The owner of a small and medium-sized weaving company revealed: “The operating rate of my factory was not high in June, about 70%. Business was even slower in the middle and late half of the year, and half of the machines were stopped. The workers also switched from the original two shifts to 3 shifts.” He also admitted that if the shipment situation worsens in the future, there will be plans to continue to reduce the start of production.
Gray cloth is in stock again
In the first half of the year, the domestic textile industry was affected by the epidemic and high costs, resulting in the outflow of textile and clothing orders, and companies were in a state of high inventory for a long time. The “618” e-commerce festival this time was not as expected, and the clothing sales performance was not good, which did not drive a large number of goods from downstream, so factories were slow to destock. It is understood that because the scale of looms transferred to northern Jiangsu, Anhui, Jiangxi and other places in the early stage is generally larger than that of Jiangsu and Zhejiang, the inventory accumulation speed is also faster and is more affected by market fluctuations.
According to data monitoring from Silkdu.com, since the end of February, the inventory of gray fabrics in Shengze has been hovering at a high level. Although there was a downward trend in the middle, it quickly rebounded and never exceeded 33 days. The current inventory of gray fabrics is 35.5 days old, and now there is a rising trend. I am afraid that it will reach a new high in the future.
Entering June, as the market for conventional fabrics gradually weakened, many manufacturers accelerated their inventory accumulation, and production reduction and holiday operations also gradually started. At present, manufacturers’ operating starts are generally not high, and there are even full-scale operations at higher levels, but they are generally in June. -70%, while the lower ones are already in the holiday stage.
Factories are under significant financial pressure
As manufacturers’ inventories become higher and higher, fabric prices become lower and lower, and corporate profits decline significantly. Under the dual impact of the epidemic and the traditional off-season, the production-to-sales ratio of both the upstream and downstream industrial chains has declined, and the financial pressure on enterprises has become even greater. Especially for weaving bosses, on the one hand they need cash to purchase raw materials, and on the other hand the payment collection cycle is extended, making capital turnover even more difficult.
A boss with more than 130 looms said: “In fact, no matter how many looms are opened, some cost expenditures still exist. The difference lies in the quantity of inventory, which is the issue of capital circulation. Now the market is getting weaker and weaker, and the circulation speed of gray cloth Slow, even if there are shipments, the payment is very slow, so the financial pressure is particularly great. We must reduce production, at least to ensure that the inventory of gray fabrics does not increase, so that we can survive the off-season of more than a few months.”
Throughout the past, during the traditional off-season every year, some companies must have reduced or suspended production. However, in the first half of this year, under the impact of the epidemic, demand in the entire industry shrank and inventories were high. The off-season ushered in before the market slowed down. Therefore, this year’s The off-season may be tougher than usual. Under such circumstances, the reduction in factory production this year will be even greater than in previous years. At the same time, raw material prices fluctuate, but as they are still supported by the cost of crude oil, prices are always at a high level. In the off-season, operating costs are high and many factories no longer have much funds to purchase raw materials, so their enthusiasm for production has further weakened.
Recently, there has been news in the market that autumn and winter orders have been placed, but according to the editor’s research, there are not many such orders, and it has not reversed the entire situation. Some foreign brands have indeed started production of autumn and winter clothing in 2023, but they are only in the early sample stage and the order quantity is not large. In addition, the foreign trade market has always been affected by the impact of orders returning to Southeast Asia and global inflation. It is difficult to change the current situation of the weaving gray fabric market by relying on foreign trade alone. More demand still comes from the domestic market, and the domestic market in the second half of the year usually begins to improve at the end of August and reaches its peak before Double Eleven.
Therefore, even if autumn and winter fabrics are shipped in advance during this year’s off-season, the market cannot conceal its profit losses, making it more difficult to raise gray fabric prices, or there may be expectations of a holiday during the high-temperature season. In the short term, the market will operate at a reduced load by “reducing production and suspending production.”
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