The news hit the screen yesterday. After 8 years of negotiations, RCEP is finally here. In the eyes of the media, its importance to China is comparable to that of the WTO back then. It is of great significance!
Although it is a bit exaggerated, it is indeed good news. Before, Obama launched a TPP, which brought all Asian countries into a group to do business, but isolated China and refused to join the group. As a result, after Trump came to power, he directly abolished the TPP. In the past few years, Trump has engaged in isolationism. Not only has he started a trade war with us, he has also started to fight with our allies, which has made all countries very dissatisfied. So we united with important neighboring trading partners and finally got RCEP done! This agreement means that Trump’s series of sanctions over the past four years have failed. With the RCEP agreement, it will be difficult for Biden to isolate and contain us after he takes office, because the biggest bargaining chip has been lost.
This RCEP agreement includes 15 countries, covering one-third of the world’s population, accounting for more than 30% of the world’s GPD, and has developed economies such as Japan, South Korea, and Australia joining, and its gold content is still very high! Of course, India chose to withdraw from the group, which caused some losses to us. But let’s play first and leave the place for it… I guess the third brother wanted to come in that day, otherwise he would be isolated.
This agreement is of great significance at a time when the U.S. election is mired in controversy and the second wave of the epidemic is high around the world. As the Prime Minister said, “This is a victory for multilateralism and free trade”! The next China-Japan-South Korea free trade agreement should be a matter of course.
China’s foreign trade takes a shot in the arm
Textile enterprises: welcome this golden opportunity
Sales fell by more than 30% and profits hovered near the profit and loss line. This is basically the production status of most textile companies this year. And one of the most obvious features of the deterioration in market conditions is the lack of peak season. As a result, the chemical fiber raw material market has been hovering at a low level.
RCEP has finally settled, which will also provide a boost to China’s foreign trade. For textile professionals, the signing of this agreement will usher in a once-in-a-lifetime opportunity.
In the past two years, Sino-US trade friction has continued, which has had a huge adverse impact on the export-oriented textile and apparel industry. At that time, some trading companies with large exports to the United States Sales have shrunk significantly. These are the “tariff sticks” under Trump’s administration. However, with the re-arrangement of the textile industry by RCEP, many textile bosses are expected to expand their channels and not only stick to “American” customers, but choose to develop in Europe, Southeast Asia and other places.
Take industry as an example. If Vietnam currently produces clothing and exports it to China, it will have to pay tariffs. If it joins the free trade agreement, the regional value chain will come into play. China imports wool from Australia and New Zealand. Because it has signed a free trade agreement, it may import wool duty-free in the future. After importing, it will be woven into fabric in China. The fabric may be exported to Vietnam. Vietnam will use the fabric to make clothing and then export it to China. In South Korea, Japan, China and other other countries, these may be tax-free, which will promote the development of the local textile and garment industry, create employment, and is also very beneficial to exports.
As China’s textile and apparel production technology levels involving R&D, design and raw and auxiliary materials continue to improve, some low-end manufacturing links have been transferred to Southeast Asia. While China’s trade in finished textile and apparel products with Southeast Asia has declined, raw and auxiliary materials have also declined. Exports of materials will increase significantly. Although the textile industry in Southeast Asian countries represented by Vietnam is rising, Chinese textile companies are not completely in a position of being replaced. The RCEP jointly promoted by China and Southeast Asia is also aimed at achieving win-win cooperation and achieving common development between China and Southeast Asian countries through regional economic cooperation. In the future, China Textile will become the dominant player in the global textile supply chain.
Bulk commodities welcome the bull market, and downstream stocking is gradually picking up
The textile and chemical fiber market may welcome the “red envelope” market!
There have been many macro events recently, such as the U.S. election, the signing of the free trade area, major vaccine progress, etc. These events have more or less affected the textile market. Amid various good news, the textile and chemical fiber market is quietly improving.
Goldman Sachs: Brent oil price will reach US$65/barrel by the end of 2021, and the commodity bull market is coming!
Recently, Goldman Sachs released the top ten investment themes for 2021, believing that commodities will usher in a new bull market next year, non-energy commodities will rise in the short term, and energy commodities will rise after winter. Usher in the rise. Goldman Sachs pointed out that there has been insufficient investment in the traditional economy over the past many years and the production capacity of traditional commodities is limited. Even at a time when demand recovery prospects are uncertain, inventories of major commodities have begun to tighten.
Therefore, Goldman Sachs believes that commodities will usher in a new round of bull market in 2021 as the large-scale launch of the new crown vaccine leads to a strong recovery in demand. Last month, Goldman Sachs pointed out in a separate report that three macro trend factors that are bullish on commodities are: larger stimulus measures, dollar weakness and inflation risks.
Assuming that the Democratic Party advocates a larger stimulusWith the passage of the bill, Goldman Sachs estimates that U.S. industrial production will grow by 4-5% by 2024, which means that the consumption of commodities such as crude oil will grow strongly in the future. In addition, Goldman Sachs said that many countries have carried out large-scale infrastructure construction in response to the epidemic, such as the EU’s green economic construction and China’s new infrastructure, which will drive a new round of demand. Goldman Sachs predicts that from 2021 to 2025, these infrastructure constructions will drive demand of approximately US$1 trillion.
Finally, Goldman Sachs pointed out that the Federal Reserve’s commitment to keeping interest rates near zero in the next few years may lead to a weaker dollar in the long term, which will be beneficial to commodity prices. The continued rise in raw material prices will eventually lead to higher inflation.
Looking at the breakdown, the energy and non-energy bull markets may be out of sync. Goldman Sachs believes that the bull market for energy commodities will not come too soon, and their prices may not rise until after winter, while non-energy commodities such as metals have already started a bull market cycle. Oil inventories remain high, and energy commodity prices may remain in a period of downturn. The recent average international crude oil price has been in the floor price range.
There are still three potential negative factors in the coming weeks: recurrence of the epidemic, the implementation of a second blockade in the United States, and the “aftermath” of the U.S. election.
This indicates that the price of crude oil will fluctuate further throughout November, and may even decline in the short term. However, Goldman Sachs believes that if oil prices remain depressed, they will further curb supply. By then, a combination of vaccine-led demand recovery, insufficient supply, and damage to shale oil development will result in a substantial rebound in oil prices.
Goldman Sachs predicts that Brent oil prices will reach US$65/barrel by the end of 2021, while its current price is about US$40/barrel.
The downstream weaving market has begun to stock up.
The rise in crude oil prices has driven changes in the price of textile raw materials, thus stimulating market stocking. It has always been a very common operation in the market. But this year this phenomenon is very rare. The main reason is that the crude oil market has repeatedly experienced sharp rises and falls, and the price of raw materials has been like a roller coaster, constantly hitting historical lows. Textile workers who prepared stocks in the early stage can only face the depreciation of raw materials and gray fabrics in stock. Therefore, no longer stocking up, buying and using as needed has become the operating principle of most weaving companies. However, this phenomenon has gradually been broken recently, and the rules for purchasing raw materials have begun to move closer to previous years.
According to the person in charge of a weaving company, he did not stock up on raw materials for most of this year, for fear that if he stocked up, the value would depreciate. But recently I have the idea of preparing raw materials, and I plan to stock up on 2-3 months’ supply, which can be used until the next month of the year. Another textile company has the same idea. They are planning to stockpile dozens of tons, which is probably enough for one or two months.
The changes in the production and sales of polyester raw materials in recent days can also be seen, especially on the 1st, the production and sales of mainstream manufacturers were between 200% and 300%, and some factories even reached an astonishing 600%. Some other interviewed companies also have the idea of stocking up, but they can only stock up in small quantities due to liquidity constraints. However, in general, the price of raw materials has increased this time, and the weaving market has stopped waiting and started to decisively purchase raw materials. Of course, this change is inseparable from the habit of weaving companies stocking up on raw materials years ago, but more importantly, weaving companies are gradually recovering their confidence in the market outlook.
Some proofing, development samples, quotations, etc. have begun to increase in the market recently. Although it is difficult to see obvious changes in the short term, the spring and summer market after the year, especially after the epidemic is put into use, will inevitably be very Great recovery.
In short, in 2020, the textile and chemical fiber industry may not be as good as expected in terms of market conditions, but winter is always a good time to recuperate, and spring will be ready to go. Bring a different kind of beauty. After the market disruption, the textile and chemical fiber industry is changing with the trend, and its next new changes are full of expectations.
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