Entering July, the textile industry chain seems to have fallen into a strange circle. Taking the operating rate as an example, as of July 17, the operating rate of domestic polyester companies was around 90%, the operating rate of weaving companies in Shengze was around 70%, and the operating rate of dyeing plants remained at 65%.
Polyester operating rate > Weaving operating rate > Dyeing plant operating rate, this is a relatively abnormal phenomenon.
The off-season is coming, orders have shrunk significantly
As we all know, the textile industry chain is an “inverted pyramid” model, and terminal demand is the key to determining the market conditions of all upstream links. The dyeing factory is located downstream in the textile industry chain and is a necessary stage for the transmission of fabrics to clothing. Its startup status is largely a concrete manifestation of terminal demand.
Monitoring data from Silkdu.com shows that currently, the operating rate of dyeing plants is only about 65%, which is the lowest operating rate in the industrial chain. Judging from the overall trend, the start-up of dyeing factories has dropped significantly since June, which also confirms from the side that the off-season for consumption has arrived as promised.
At this time, some people would say that looking solely at the operating rate of dyeing plants is one-sided. Then let’s look directly at the foreign trade export situation. Data show that in June, textile and clothing exports were US$26.99 billion, a year-on-year decrease of 14.3%, and a month-on-month increase of 6.6%. Among them, textile exports were US$11.57 billion, a decrease of 14.1%, and a month-on-month decrease of 3.8%. Clothing exports were US$15.42 billion, a decrease of 14.4% month-on-month. An increase of 16%.
From this set of data, it is not difficult to see that textile and apparel exports experienced another double-digit decline year-on-year in June, with a decline of 14.3%. With demand in key markets shrinking and orders outflowing, textile and apparel exports are facing a difficult uphill climb.
An industry and trade enterprise revealed that our current order situation is not optimistic and will probably only last until early August. The total order volume has decreased by about 10% year-on-year, and there are no plans to reduce production for the time being.
For weaving companies, although order maintenance is not good, production reduction is not the only way. Therefore, it seems reasonable that the operating rate of the weaving end is better than that of the printing and dyeing end.
Inventories are rising, is it due to stocking up?
Comparing the weaving end and the printing and dyeing end, the operating rate of the polyester end is unparalleled. High production and sales and low inventory are the direct reasons for this round of high operating rate.
On June 14, June 26, and July 7, in less than a month, the polyester factory conducted three rounds of price reduction promotions. The average polyester production and sales in these three days reached 386.5%, 194.7%, and 194.7% respectively. 197.9%, the effect of destocking is immediate. Frequent price reduction promotions have also made the supply of some specifications of polyester filament tight, and downstream concerns have increased, which in turn has led to an increase in the willingness of the weaving end to replenish its positions.
As we mentioned above, the overall order maintenance situation at the weaving end is not ideal. Now that the raw materials have been purchased, companies that lack order support and turn to production of inventory are really rushing to put products on the shelves. A weaving company said that since July, inventory has shown a clear upward trend. The current inventory has increased by about 5% compared with June, and inventory pressure has gradually emerged.
Faced with the rising inventory of gray fabrics, in order to collect funds and effectively destock, weaving companies often choose to sell goods at low prices. But at this stage, how many of the goods thrown away at low prices are destined for the clothing production line?
The survey results show that currently, most of the orders for weaving companies are brought by fabric spot supermarkets. The arrival of the involution era has made fabrics available in a comprehensive range of categories and colors. The huge inventory has led to an increasing demand for gray fabrics, which has also caused the inventory of gray fabrics that originally belonged to the weaving end to gradually move towards the finished fabric end, causing the “reservoir” of fabrics to accumulate.
Postscript:
Although it is an extremely difficult decision to reduce the start of construction, blindly rising inventory will also become a “ticking time bomb”. The off-season for consumption coincides with the onset of high temperatures. Perhaps taking some holidays and reducing production will allow companies to better cope with the next market changes.
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