Some people have said before that 2020 will be the “most difficult” year for foreign traders, but in fact the “most difficult” year has just begun. It doesn’t matter if there were no orders, no performance, or no profits last year. There are orders this year, but the most terrifying thing is that the general environment is eating away at your wealth.
Nowadays, foreign traders are facing three major difficulties. How many people are left who can resist them?
The first major difficulty: rising exchange rate
The yuan hit a new high in the past three years.
On May 25, the RMB rose strongly. Among them, the onshore RMB exchange rate opened higher against the US dollar, breaking through and rising nearly 200 points, reaching an intraday high of 6.4016, which was 6.40 away from 6.40. The pass is just a stone’s throw away. At the same time, the offshore RMB exchange rate against the U.S. dollar rose sharply, standing strongly above the 6.40 mark, reaching a maximum of 6.3944. On May 26, the onshore RMB and offshore RMB exchange rates against the U.S. dollar fluctuated and rose. As of noon, the onshore RMB exchange rate against the U.S. dollar The exchange rates of offshore RMB and offshore RMB against the US dollar both rose above the 6.4 yuan mark, entering the era of 6.3 yuan.
Looking back, this wave of RMB rise began in April. Since the beginning of April, the onshore RMB has risen by 2.18%, with a surge of more than 1,400 points; the offshore RMB has risen by more than 1,500 points, with an increase of 2.73%.
Although in the long run, the appreciation of the RMB is due to optimism about China’s economy and is considered a positive situation, in the short term, it does pose greater challenges to textile foreign trade companies.
Take a textile foreign trade order of 1 million US dollars as an example. When the exchange rate is 6.5, the foreign exchange settlement can be 6.5 million yuan. When the exchange rate becomes 6.4, the foreign exchange settlement becomes 6.4 million yuan, the difference reached 100,000 yuan. After the exchange rate fluctuates, it is also very difficult to negotiate with foreign businessmen for price adjustments. China now has an overall overcapacity in textile production. Therefore, overseas buyers take the initiative in foreign trade negotiations. When the RMB depreciates, they will ask to change the purchase price when the exchange rate fluctuates. But when the exchange rate appreciates, they will not rush to adjust the price. In the end, they will be injured. It’s always textile companies. Now under the influence of the epidemic, foreign trade demand has shrunk sharply, market competition has become more intense, and companies’ bargaining power has become even lower.
The second biggest difficulty: international freight rates break records again
“Freight prices are becoming crazy” and “record-breaking again”… These are the words most frequently spoken by foreign trade and freight forwarders recently.
As Sino-US trade picks up, maritime containers sent from China to the United States surged by 46.5% to 987,834, accounting for about 60% of Asia’s transportation volume. A box is hard to find, a cabin is hard to find again! Containers are frequently sold out, and shipping costs are soaring! “Since April this year, ‘it’s hard to find a container’ has been bothering us again. Not only can we not book a container in May, but the price of a 40-foot container on the West American route is US$9,000, which has nearly doubled from the end of last year. The factory received it at the beginning of the year All orders are waiting for shipment.” One seller couldn’t help but said “it’s too difficult.”
Relevant data show that China’s exports of textiles to the United States in 2020 amounted to 352 billion yuan. It can be seen that the crazy increase in sea freight and the difficulty in finding containers will have a lot of impact on domestic textile companies. It is understood that many local foreign trade companies have received news that customers have stopped shipping due to high sea freight, and costs have continued to rise, and profits have been squeezed again and again!
The third major difficulty: There is no end to the rise in raw materials
Recently Affected by “supply shortages, inflationary pressures” and other factors, the prices of raw materials such as copper, iron, aluminum, and plastics have continued to rise this year… The affected industries include furniture, home appliances, electronics, textiles, tires, etc.! In recent days, the national regulatory policy has obvious intentions to cool down. However, from the perspective of the global environment, the complexity of external factors cannot be reversed by our own efforts, which also leads to our inability to solve the current situation from upstream. Central policy regulation can only temporarily drive back the heat wave of capital speculation, but it is difficult to change the fundamental trend, especially for internationally priced commodities such as crude oil and iron ore.
From the perspective of the industrial chain, the downstream textile companies should be the most painful at present, because they can only It’s “surviving in the cracks”, how do you say it? On the one hand, raw material prices are rising rapidly. At this time, not only the inventory preparation plan must be considered, but also the price transmission work must be implemented. The further down the problematic industry chain is, the greater the pressure to raise prices, and the cost caused by prices can only be borne passively, and it also faces the problem of shortage of raw materials. The core of all these problems is capital flow. If there happens to be a big deviation in price difference and inventory management, it is very easy to cause a company with an originally healthy business to collapse.
Three major problems have intensified
Recently, the textile foreign trade market seems to be at a crossroads again
With these three major difficulties, scattered foreign trade companies have no power to fight back. I can only watch helplessly as my original profits are being eaten away bit by bit. Picture: Even after two months of work, I am still losing money. Recently, the textile foreign trade market seems to be at a crossroads again. Recently, a textile company in Jiangsu reported, in recent days, downstream weaving factories, traders and other customers’ inquiries and delivery have slowed down, and market concerns have heated up again. Focusing on the following points:
First, as the epidemic situation in India, Bangladesh, Pakistan and other countries has gradually been controlled, the return orders from Europe, the United States, India and other countries have gradually slowed down the production of yarn mills, cloth mills and downstream industrial chains. Recovery or lack of sustainability;
Secondly, according to convention, the domestic sales market enters the off-season in June/July, and it remains to be seen whether the gauze can achieve “not weak in the off-season”;
Third, the sharp rise in sea freight, the difficulty of finding shipping space, and the serious accumulation of cargo in some European and American ports, which has led to increased demurrage costs, all need to be carefully considered, especially when receiving medium and long-term orders. The situation of “losing your wife and losing your army”;
Fourthly, textile and clothing enterprises still have foreign exchange lock-in, increased exchange rate fluctuation clauses in contracts, and signed forward foreign exchange settlement and sales agreements with banks. There is a certain degree of difficulty; once the RMB appreciates significantly, the profits of textile and clothing companies will be swallowed up or even suffer losses. </p