I have experienced strong winds and waves. However, this spring, leaders in the textile industry lamented the “unprecedented” difficulties.
Since most governments around the world only require citizens to engage in daily basic necessary work and activities, textile supply The transaction activity of the chain has come to a standstill. This has put apparel manufacturers under heavy pressure, with many large brand owners canceling orders that were partially completed or ready to ship, forcing supply chain disruptions to come full circle.
Integrated factories for spinning, weaving, knitting, fabric finishing and garment production, as well as direct selling brands, are now facing supply chain disruptions. Due to the rapid decline in income in the lower reaches of the industrial chain, a large number of orders were canceled, which immediately caused a tightening of corporate liquidity.
I can’t hold it any longer! The world’s largest cotton shirt manufacturer and exporter has decided to close three factories one after another before the end of July!
On April 20, Esquel Group, currently the world’s largest manufacturer and exporter of cotton shirts, announced on its official website that it had decided to close three factories one after another before the end of July.
Esquel Group stated that the global outbreak of the epidemic has created a crisis for the supply chain of the global textile and garment industry. This is an unprecedented perfect storm. Everyone is under tremendous pressure, and some are even struggling to survive. In order to control the spread of the epidemic, many countries have forced stores to close, economic activities have come to a close, and the retail industry has almost come to a standstill.
The above measures have also caused an unprecedented impact on Esquel Group, which is in the upstream of the textile and garment supply chain. In order to ensure Esquel’s sustainable operations, Esquel Group has decisively taken a series of actions, including adjusting business scale, significantly reducing operating expenses and streamlining personnel.
We have to make the most difficult and painful decision to close the following factories one after another before the end of July this year:
On April 30, 2020, Esquel’s factory in Fenghua was closed;
On June 12, 2020, Esquel Malaysia’s two factories in Penang and Kelantan were closed;
On July 31, 2020, Esquel Mauritius’ factory in Flacq was closed.
Esquel Group admitted that in the coming months, the company will try its best to ensure that all affected employees receive appropriate and fair transition arrangements. According to Qichacha, Fenghua Esquel Garment Co., Ltd. is located at No. 355 Yuelin East Road, Fenghua City. The company was established on December 28, 2011, with a registered capital of US$2 million. The company has 562 insured persons. The company’s business scope involves clothing, Manufacturing and processing of sewing products and apparel products; self-operated and agency import and export business of various commodities and technologies, etc.
Public information shows that Esquel Group was founded in 1978 and is a vertically integrated cotton textile and apparel group. Its business scope covers cotton cultivation, spinning, weaving, dyeing and finishing, garment making, accessories, packaging and retail. It provides one-stop shirt services and is currently the world’s largest manufacturer and exporter of cotton shirts.
When I resumed driving at high speed at full speed, the exit in front was blocked!
It’s like being caught off guard by the late spring cold.
Most textile and apparel companies that face consumer terminals have experienced such a reversal – in February, overseas customers asked them: Can you still deliver goods? In March, when production capacity gradually recovered, it was their turn to ask overseas customers: Can you still receive goods?
It’s a bit of a joke, but it expresses helplessness.
The current textile supply chain is indeed facing a very bad state. Globally, as market consumption decreased, ICE cotton futures fell by approximately 30% from 70 cents per pound in February to a low of 48 cents per pound in late March, and cotton growers gained The profits are getting smaller and smaller.
Spinning mills are trapped by high-priced contracts, inventory and limited market consumption, resulting in high inventory levels. There are clear concerns about the execution of high-priced contracts by customers and potential default risks from international purchasers. Governments restricted all activities except basic essential services until the end of April 2020, which resulted in the closure of many spinning mills, knitting mills, weavers and ginners.
The impact of the sudden drop in orders will soon be transmitted from downstream manufacturers to upstream textile and chemical fiber companies
The market and funds have both become “stuck”. For Fujian chemical fiber giant Yongrong Holding Group, the cold wind has not yet hit our face directly. Since February, Yongrong has actively resumed work and production, and its orders and sales in the first quarter were basically the same as the same period last year. Although this large industrial group, whose main business is petrochemical nylon new materials, is not directly affected, problems in the downstream terminal market will be transmitted to the upstream sooner or later. Chairman Wu Huaxin knows very well that if the skin is gone, the hair will not be attached.
During the epidemic, Saudi Arabia and Russia started an oil price war. International crude oil prices plummeted. The raw materials used to produce chemical fiber fabrics, PTA (terephthalic acid) and MEG (ethyl ethyl alcohol), Glycol) prices have also fallen. In the past, falling raw material prices would have excited Weng Shengjin, chairman of the board of directors of China Flexible Packaging Group, but this time, he felt something was not good – downstream exports were blocked, and upstream inventories were bound to increase. No matter how low-priced the raw materials were, it was still possible to buy them back. Continue to depreciate.
The benefits of reverse takeover of “the world’s number one”�Special, promoted to the world’s largest caprolactam manufacturer; with 21 wholly-owned subsidiaries, it is the first in the industry to open up a complete industrial chain of 8 upstream and downstream links… Hengshen Holding Group, as the leading chemical fiber enterprise in Fujian, is in the limelight. Chairman Chen Jianlong sees the impact of the epidemic on foreign trade and is anxious: the downstream terminal market is “traffic jammed”, and the more vigorously upstream drives at high speeds, the closer it is to the “jam point”.
The plunge in crude oil has led to a general decline in the textile industry chain, causing serious internal friction in the industry
In the context of the plunge in crude oil, textile raw materials related to crude oil have also generally declined. According to statistics, raw materials such as PTA and ethylene glycol have plummeted recently. This downturn in market conditions can easily lead to another extreme situation – a price war.
“Price war” is indeed an effective way to suppress competitors, digest inventory, and occupy more market shares in the short term, but it is very easy to get out of control and lead to irrational development of the industry. The competition in the stock market is a typical zero-sum effect, that is, “if your opponent sells one ton more, you will have to sell one ton less.” Under such a background, it is not easy for small fish to survive, and it is not easy for big crocodiles. Once a price war breaks out, not only will the companies participating in the war not get a bargain, but it will also drive the entire industry into a state of madness.
If a company engages in low-price sales for a long time, profits will be reduced, and investment in R&D, technological innovation, marketing, management and other fields will be reduced accordingly, resulting in insufficient development potential, and will This, in turn, further affects performance and ultimately leads to a vicious cycle. For the industry, the overall industry level will decline in the long run, which is tantamount to drinking poison to quench thirst.
In the future, for some high-quality companies that are larger in scale and more competitive, focus on building brands, and have higher credibility, if they can seize opportunities in crises, they will be able to Going against the trend, some companies without brands and quality will be eliminated at an accelerated pace. After a major reshuffle in the industry, the original order will be broken and a new situation will be formed in which the strong will always be strong and the big will be bigger.
But at present, no one knows what will happen in the market next. Is it a V-shaped recovery, a U-shaped recovery, or some other shape of recovery? Time will tell. </p
