Recently, textile people’s circle of friends was flooded with a “Production Restriction Notice”!%20%20
Affected by the epidemic and the imbalance between supply and demand, a textile association requires all companies to start from June 20th.%20%20Operational conditions limit production by 30-50%.%20%20
Prior to this, a production suspension notice from a company was widely circulated in the circle of friends.%20%20
The general meaning is that due to the impact of the epidemic this year, foreign trade orders have decreased, prices have plummeted, and inventory has been severely squeezed, resulting in serious losses. There is no place to continue production, and production and operation have faced difficulties… Due to the above reasons, in the end,%20%20The company expects to last for up to a month and requires all workers to be prepared to stop work in advance and find their own way out.%20%20
When the market conditions are getting weaker and weaker, the announcements of production restrictions and holidays have undoubtedly caused waves in the market.%20%20Is the market really so bad?%20%20Is there really going to be a wave of production shutdowns?%20%20
However, after visiting the market, we found that the suspension of production is just an exception, and most companies are still operating normally, although many business owners said that the market is really bad.%20%20Poor, conventional products have nowhere to sell. No orders and high inventory have once again become a pain point for textile bosses. However, manufacturers’ operating rates have not declined significantly, and most companies still maintain around 70% of their operating rates.%20%20
grey fabric inventory is at a new high, but the operating rate is stable
According to the sample companies monitored by China Silk Capital Network,%20%20At present, the inventory of gray fabrics in Shengze area is about 43-44 days, which is much higher than the level of the same period last year.%20%20The textile market was not good last year. In addition to the negative consequences of production capacity expansion, Sino-US trade was also one of the important reasons.%20%20This year, naturally, the “black swan” of the epidemic has dealt a heavy blow to the textile industry.%20%20There is no gold in the “Golden Three”, there is no silver in the “Silver Four”, and there is no red in the “Red May”. The bleak market did not usher in the expected market.%20%20
For textile companies, the most direct feeling is that there are no orders!%20%20Inventory is too high!%20%20Among the companies surveyed, inventory of millions of meters has become the norm, and some even have inventories of tens of millions of meters.%20%20Therefore, in the case of insufficient order follow-up, the most common cost control operation for weaving companies is to reduce production and take turns.%20%20During this Dragon Boat Festival, many textile companies said they would take 2-3 days off.%20%20
Since the beginning of this year, as the market has been difficult to improve, it has become the norm for weaving companies to take turns to rest, resulting in a lower operating rate than in previous years.%20%20According to statistics from the China Silk City Network, the current operating rate of looms in Shengze is around 68%.%20%20Careful observation shows that although the manufacturer’s operating rate is not high this year, the operating rate has been fluctuating in a stable range without obvious ups and downs, indicating that the company has not been on holiday for a long time or stopped production on a large scale.%20%20
No%20%20A few companies have been saying that if the price of polyester yarn drops again, we will stop production, if there are no orders, we will stop production, and if the inventory is high, we will stop production… However, under the fact that it is difficult for the market to reverse, companies%20%20But I’m still struggling, why?
1. Compared with the cost of recruiting workers, the difficulty of recruiting workers is more of a headache
The difficulty of recruiting workers after the new year has always been a persistent problem, especially due to the epidemic this year. Many workers are stranded in their hometowns and cannot make it. Even if they come over, they have to be quarantined for another 14 days, resulting in%20%20After the manufacturer resumed work, its production capacity has been unable to increase.%20%20Although it is difficult for weaving manufacturers to maintain orders now, they do not have to worry about workers. Once there is an order, workers will be available immediately.%20%20
Even if there is a situation of rotating holidays, according to weaving enterprises, as long as they are on the job, workers’ wages are not greatly affected, and the reduction is about 10-20% at most, which is not obvious.%20%20In previous surveys, some companies also said that even though the company itself has difficulties with orders this year, workers’ wages have not been reduced, and there is no significant change from previous years.%20%20It can be seen that the current wages of workers are actually not low. Compared with the high cost of labor, the difficulty of recruiting workers may be more of a headache. Considering this factor, companies will not blindly stop production.%20%20
2. The capital chain is tight and easy to break when production is stopped
For enterprises, setting up a factory is a big investment.%20%20It can range from hundreds of thousands to millions or tens of millions.%20%20Rent, water and electricity, quotas, workers’ wages, and even every item in the factory all require money. All of these are a big mountain that weighs on Boss Bu.%20%20Basically, companies need loans or financing to set up factories.%20%20
Especially this year, the epidemic has made companies even more aware of the importance of funds.%20%20Compared with orders, cloth bosses care more about the cloth piled in the warehouse.%20%20Cloth is money. If the cloth cannot be sold, the money will sit in the warehouse and it will be difficult for the funds to flow back.%20%20The reality is that most weaving manufacturers are full of inventory, and difficulty in capital turnover is the current situation of most manufacturers.%20%20If production suddenly stops now, banks or investors will definitely think that the company is experiencing operating difficulties and will demand payment or withdraw capital.%20%20For enterprises, this makes the capital chain even worse.%20%20
3. Psychological factors, having expectations for the market
There is a big reason why we do not stop production blindly.%20%20Companies still have expectations for the market. What if things get better later?%20%20
%20%20But there are also times when “bad cloth” is popular. Thinking back to 2017 and 2018, due to environmental protection regulations and market production capacity shrinking, pongee and polyester taffeta became popular all of a sudden. Fabrics were hard to find, and stockouts were serious. Weaving manufacturers were%20%20The day when “the machine rings and you get a thousand taels of gold”.%20%20
Although the current market situation is not good, market demand still exists. If demand recovers in the future, can the most conventional products make manufacturers “get rich overnight”?%20%20No one knows when the market will hit. If we stop production now and pick up later, it will be difficult to recruit workers and we cannot produce immediately, we may have missed a good opportunity.%20%20
No manufacturer will be willing to stop production while it can still support it. Instead, load reduction and rotational rest will be used to alleviate cost pressure.%20%20Even though most manufacturers will reveal their willingness to stop production due to poor market conditions in the later period, perhaps not many will actually implement it.%20%20
Looking at the market situation in the first half of the year, textile people are not optimistic about the trend in the second half of the year, but there are opportunities in dangers. No one can guarantee when the market will come.%20%20It just depends on who can survive the tough times.%20%20
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