The 618 Shopping Festival ended successfully last Saturday. For the domestic market, according to previous years, the peak sales occurred during the 618 event. However, the sales volume of this year’s 618 Shopping Festival was lower than expected, and there was no hot return order in previous years. This year’s national sports trend led by Liu Genghong alone caused the sales of women’s sports T-shirts, sweatpants, etc. on the JD.com platform to increase by more than ten times year-on-year during the 618 period.
Textile market conditions are weak
However, the gray fabric end, which is closely related to clothing, does not seem to be affected by this and is equally popular, maintaining a stable operation in a tepid manner. This week, the fabric market showed a “slight increase in volume and price”, mainly reflected in casual high-elastic fabrics, because sportswear like these requires good stretch and a certain degree of wear resistance, and the clothing will generally have good elasticity. Some elastic chemical fiber fabrics are used, but only a small number of manufacturers have strong sales, and there are still some manufacturers that produce these products but their sales are average.
From the data point of view, both the operating rate and gray fabric inventory confirm the downturn of the textile market. On the one hand, the weaving operating rate remains low at 66.5% due to the tepid market. On the other hand, due to poor shipments, gray fabric inventory has risen to 35 days, it is also the traditional off-season of the weaving market, and the overall market is actually weak.
The 618 Shopping Festival failed to drive domestic trade demand, and overseas, only some autumn and winter clothing orders and some foreign trade home textile orders that have been stocked in advance have just been placed, such as nylon yarn and high-density polyester taffeta, and the orders are compared with last year. The volume has shrunk by nearly half. Even if there are orders, sales are still lower than last year. And since the U.S. interest rate hike last week, the trend of the RMB has begun to rise. For us foreign traders, the fluctuations in exchange rates have always made us cry.
Rising exchange rates reduce foreign trade profits
After exchange rate fluctuations, foreign traders miss the opportunity to settle foreign exchange. The biggest impact is undoubtedly the exchange rate during foreign exchange settlement and the quotation given to customers. While many foreign traders were still “waiting for a better opportunity to settle foreign exchange,” they missed a good opportunity. And in today’s market environment, many companies will have difficulties in capital turnover and have no time to wait for the next better opportunity to settle foreign exchange. When they are in urgent need of funds, they can only reluctantly settle foreign exchange.
Of course, the RMB exchange rate has just begun to rise. It is still a good time for foreign traders who have not yet settled foreign exchange. However, for companies that have signed contracts in the early stage and have not received the final payment yet, when the final payment arrives in the later period, the exchange rate will rise sharply, which will cause losses. That’s big. Therefore, for foreign traders, it is best for the exchange rate to remain stable. An old foreign trade master said: “Now the order quotation is greatly affected by the exchange rate, and the US dollar price of the newly quoted products will be lower than before.”
Freight costs remain high
In addition to the strengthening of the RMB exchange rate, recent shipping has continued to reach last year’s high level. It is understood that the first quarter reports of major shipping companies have been released recently, and the global container shipping industry has continued the hot market last year. Some shipping companies can make enough money per ship just to make one trip, and some shipping companies can make an average of 600 million yuan a day. Not only has sea freight increased, but since the outbreak in Shanghai this year, foreign traders have had to choose to deliver goods from Ningbo Port or even the farther Guangzhou Port. The cost has surged. In the past, goods that only cost 200 yuan per trip now cost 500 yuan or more. Expensive prices, a textile boss who specializes in foreign trade said: “The epidemic has affected port shipments, and the indefinite extension of delivery time has not only affected new customers’ orders, but freight charges have completely compressed profits.”
It is worth noting that precisely because the shipping market is so hot right now, freight companies are rushing to add new shipping capacity and are placing orders to buy new ships. It takes time to build these new ships, and they may still face challenges in the next 1 to 3 years. High sea freight, but since the current rise in sea freight is ultimately due to structural prosperity under the influence of the epidemic, after one to three years, new shipping capacity will enter the market and the impact of the epidemic will ease, then foreign traders will no longer have to worry about high costs. The sea freight is a headache.
Generally speaking, from the perspective of the future, the textile market will be mainly affected by the transfer of industry to Vietnam and rising labor costs. Domestic sales orders are difficult to do, and export orders will still be affected by freight costs.
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