Speaking of production capacity transfer, it can be said that it is the current trend in the textile industry. From the previous production capacity transfer to the central and western regions, to the current production capacity transfer to Southeast Asia.
What is it that makes textile people flock to these places?
Capacity transfer is a cycle
In fact, this matter should start from a relatively long time ago. The transfer of textile production capacity is actually a cycle. Feng shui takes turns, and the current situation seems to have been doomed a long time ago.
We need to go back to the last century. The center of gravity of the global textile industry was not in China. From 1910 to 1930, Japan relied on low labor costs to undertake a large number of textile manufacturing from Western countries.
From 1970 to 1995: Japan transformed to high-end technology and manufacturing, and South Korea and Taiwan assumed the role of export centers. Until 1990-2015: South Korea and Taiwan looked for a path to transformation and upgrading. China started from the garment sector, and its textile industry quickly rose to the absolute lead.
This is not telling you a story. It illustrates one thing. When the textile industry develops to a certain level, it will inevitably transform and move from one place to another.
So what does it mean to develop to a certain level? What can be found is that the places that undertake the textile industry all have a common feature – cheap labor.
The price/performance ratio is too low
Therefore, when labor costs in a place rise sharply, many companies will naturally move to places with lower labor costs. You must know that for textile companies, labor costs, raw material costs, water and electricity bills and factory rents basically constitute All costs.
As for the cost of raw materials, everyone now knows that even if the demand side market has not improved, boosted by the cost side, raw material prices are still rising step by step. Even if downstream resistance is high, the increase will only be reduced a little.
July is the weakest month for the market, and the price of polyester filament is still rising. At the end of the month, it increased by 320 yuan/ton compared with the beginning of the month. However, manpower, water and electricity charges, and factory rent seem to be naturally connected, and labor costs are low. place, the other two will also be relatively lower.
Therefore, when raw materials cannot be replaced, the rising cost of raw materials makes the profits of weaving companies less and less, and moving to places with lower labor costs seems to be the best choice.
Industrial upgrading will inevitably bring pains, and production capacity transfer is one of them. So what impact will it have on the textile market in the future after the transfer?
First of all, the transfer of production capacity also means the expansion of production capacity. Since factory rents are cheap in peripheral areas, water and electricity bills are cheap, and labor costs are low, many weaving companies will expand after the transfer. One company I learned about originally had 50 units. The manufacturer of looms expanded to 200 units after moving to the Midwest.
Secondly, because the expansion of production capacity means more and more inventory on the market, the current global economic environment is not ideal, and residents’ consumption desire is low. Therefore, the terminal clothing industry is in a sluggish market. After this is transmitted to the upstream, the number of orders also decreases. It is much less than in previous years. The current inventory of gray fabrics on the market has reached 36.3 days.
In addition, due to low costs and large inventories, price wars are inevitable. Now the phenomenon of price-only theory in the market is getting more and more intense. Recently, under the pressure of costs, the price of gray fabrics has finally increased slightly, but unfortunately, the downstream companies do not buy it. , but fortunately it is still in the off-season and the impact will not be big. After a while, the price may have to be adjusted again.
To sum up, production capacity transfer is the trend of the times. Although industrial upgrading will bring pain to us textile people, it is not an opportunity to seize the trend of the times.
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