The epidemic has deeply affected the global economy, and the textile industry has been affected even more deeply. However, from February to now, looking at all aspects of the entire industry chain, we have not yet fully realized the seriousness of this recession.
I am still happy with price increases, price decreases and then price increases. The price increase at the beginning of the year is due to insufficient supply and demand. caused by the relative supply shortage, and the subsequent price drop is a true reflection of the reduction in orders. According to a survey by the China Home Textile Industry Association, starting from March 18, many export companies received notices of delayed shipments from European and American customers, and some overseas customers canceled orders for the past two months. As textile companies reduce the proportion of production shutdowns and the pressure of oversupply of raw materials further increases, the market is full of doubts about whether chemical fiber weaving can survive the darkest month of April.
Since the news came to the market this week that Tsarist Russia is willing to resume oil trade negotiations, international crude oil has increased by more than 20%, and the polyester market has ushered in a wave of climax. PTA’s main futures surged sharply, and the downstream buying sentiment began to cover positions. Polyester factories increased their production and sales and prices increased. At 3 pm on the 2nd, the production and sales of individual polyester factories reached 600%-1000%, and the inventory release was good. At the weekend, there was even news of closure of polyester factories.
So what about the price increase that is about to start again?
The actual reason is a self-salvation due to the upstream’s lack of confidence in the future market! A kind of gamble that goes up if it can go up and continues to go down if it can’t! After the panic “buying the bottom”, the market will face a longer “ice age”.
Let’s take a look at McKinsey’s global economic forecasts for this year and the next two years. They are basically negative growth, and JPM economic data forecasts: GDP: global negative growth -2.6%; the United States -5.3 %; Eurozone -3.4%; Japan: -3.1%; China grew by 1.1%; India grew by 2.1%; except for low-single-digit growth in Asia, other regions experienced negative growth.
Let’s take a look at the foreign trade reduction of Guangdong Province, the vanguard of the export-oriented economy, from January to February 2020. There was a total decrease of 1,000 billion, then the next 3, 4, and 5 will only get worse and not recover in the short term.
Although the current resumption rate of industrial enterprises is high, the capacity utilization rate is low (for example, the automobile industry is only 40%; power plants Coal consumption dropped by 20% year-on-year in March), and demand may decline (exports in the second quarter are expected to drop by more than 20%). At the same time, due to travel concerns, travel will still decrease after the resumption of work, and employment and income will be affected, which will further lead to a decline in consumption. , and the decline in consumption directly affects the growth of domestic demand.
From the perspective of downstream weaving manufacturers, it has been difficult to place orders after resuming work, and it is difficult to balance production and sales, resulting in rising inventories. Judging from the monitoring companies, the current gray fabric inventory of weaving manufacturers in Jiangsu and Zhejiang has risen to 41-42 days, which is about 7 days higher than the inventory of about 35 days in the same period of previous years. It is almost approaching the highest inventory of 42-43 days during the off-season last year. The current inventory of gray fabrics is scary.
Grey fabric is money. If it cannot be sold, the money is sitting in the warehouse, but the looms are still producing continuously, which puts the weaving manufacturers under great pressure. Therefore, Many companies choose to take holidays in April to reduce business costs.
For polyester companies, the overdraft of inventory triggers anxiety about the market outlook. Since the beginning of February, the term “buying the bottom” has become a hotly discussed topic in the polyester downstream. Both traders and gray fabric factories have actively participated in the “buying the bottom”. Some people have spotted the “opportunity” and stocked up. Unexpectedly, overseas public health incidents intensified, further dragging down the market’s purchasing power, and polyester began to decline precipitously.
Many downstream purchasers only paid deposits and have been unable to come to pick up the goods. Polyester companies are worried that the downstream companies will regret their orders due to the sharp drop in prices. Many companies have full inventory. It is full, but unfortunately it is still said to be out of stock.
For gray fabrics and traders, hoarding large quantities of goods may be risky. After investigation, the gray cloth factory already had 15-45 days worth of raw materials in its early stage. On the basis of the loss of foreign trade orders and the scarcity of domestic trade orders, the company’s operational pressure has increased sharply. This large-scale stocking operation has further intensified the pressure on production and operation. Large, production costs are too high, corporate funds are tight, and other contradictions may become prominent.
As for traders, the large amount of stocking on Thursday did not reflect “preparing for a rainy day”. The actual unit price on the second day did not rise as expected. If there is a large amount of stocking, short- and medium-term It seems that it may face the risk of “price but no market”.
As domestic demand and foreign trade continue to decline and are difficult to recover in the short term, the reduction in end-user demand has become an ironclad fact. This weak chassis can no longer be powerful. Support the motivation for price increases. According to the predictions of professional medical institutions, the domestic epidemic in the United States will not reach an inflection point until at least mid-April. As long as the epidemic in the United States does not reach the extreme pressure level, the market panic will continue.The price has not yet reached its extreme point, and the moment for chemical fiber prices to change from rise to fall has not yet arrived. The prediction of the market still has to return to the fundamentals.
From the perspective of the polyester chain, cash flow is currently unevenly distributed, PX and PTA processing fees are abundant, and manufacturers have no expectations of reducing their burden, which means that high inventory will still be maintained in the short to medium term. , high-load mode. As the direct downstream of polyester – weaving factories, a large number of foreign trade orders have been lost, and they have all moved to the domestic market. The competition for orders is fierce and profits continue to shrink. Therefore, polyester filament yarns still have downward momentum, and chemical fiber gray fabrics are no exception.
The ambivalent mentality of being unable to rise but unwilling to fall will directly lead to the overall price of the industry this year and even next year being in a strange cycle of false rises and real falls.
How do downstream companies in the industry deal with this situation?
1. Deal with price increases calmly. Even if the price increases occasionally, it will not last for a few days without stocking up.
2. Abandon the bottom-buying mentality when dealing with falling prices, because profits this year will never be more important than cash flow.
3. Sort out the direction of customer structure adjustment and transform towards differentiated needs such as domestic sales and e-commerce.
4. Enterprises that are unable to resume orders in the short term abandon production and switch to peer OEMs to ensure reliable returns and reduce costs.
As for the upstream polyester factories, they must “give up their illusions, face reality, and be prepared to tide over the difficulties together with the downstream.” In the absence of demand support, There is almost no possibility of success if you still want to follow the old “three steps forward, two steps back” pricing model.
The rise and fall of prices cannot change the size of demand. It is nothing more than a game of interests and the transfer of inventory. In the short term, you must not blindly hoard goods to buy the bottom. It is understandable that you just need to stock up. Even if this “bottom” is a “bottom”, the bottoming time is a long and repeated process. It is recommended to build positions in batches. The first half of 2020 is destined to be cold and difficult. Don’t follow the trend and be blind, for there will be real sunshine and sunshine. </p
