Fabric companies tighten their cotton “nerves”
Being in the lower reaches of the industrial chain, the trend of cotton prices is undoubtedly the focus of fabric companies. After experiencing the “big ups and downs” in 2008, the domestic cotton market entered a relatively stable period of narrow range fluctuations after the Spring Festival in 2009. It seems that fabric companies can now “breathe a sigh of relief.” However, in the “extraordinary period” when the economy has not yet recovered, there are still many uncertainties about whether the cotton price trend will be stable this year. Therefore, fabric companies still need to tighten the “nerve” of cotton. At the same time, by increasing the added value of products, developing blended fiber fabrics, Focus on improving brand effect and other directions to resolve the pressure on raw material costs.
Analyst: Debate on cotton prices in the market outlook
The high cotton prices in 2007 gave cotton farmers generally high expectations for cotton prices in 2008, which led to the expansion of cotton planting area in 2008. However, the cotton market continued to decline in the second half of last year, coupled with the increase in cotton planting costs, the income of cotton farmers in various regions was significantly reduced, and there were also losses. Therefore, the cotton planting area intentions of major cotton-producing areas this year have generally declined. According to statistics from the National Cotton Market Monitoring System, the intended cotton planting area nationwide this year is 71.2832 million acres, a decrease of 15.5941 million acres compared with the previous year, a decrease of 17.95%.
Will the decline in cotton planting area lead to an increase in cotton prices in the second half of the year?
Yangtze Futures analyst Huang Junfei believes that with the stabilization of the economic situation, the revitalization of my country’s textile industry is expected to boost cotton demand, so spot cotton prices may rise to around 12,600 yuan/ton in August and September this year.
Mainland futures analysts Xu Ting and Yang Zhen analyzed that the macro situation in the first half of 2009 will basically be difficult to improve, and the export of cotton yarn and cotton cloth will slow down significantly. With the average 48.70-month price cycle of U.S. cotton and the combination of various factors such as the country’s loose policy tone, which helps textile companies stabilize and recover, cotton prices are likely to bottom out in the 2009 quarter.
However, some analysts hold different views on this. Du Ying, a researcher at the Xinjiang Sales Department of Wanda Futures, believes that cotton prices may not improve in the second half of this year. One is because huge inventories will weaken the impact of production cuts. At present, my country’s national reserve inventory is about 4.2 million tons. In previous years, the national reserve inventory was only more than 1 million tons. When cotton prices rise, in order to keep the costs of textile companies from being too high, the state will sell off cotton reserves, so there is limited room for price increases. Second, because European and American countries are affected by the economic crisis, consumption cannot immediately return to previous levels.
Great Wall Weiye Futures analyst Zhou Jianrui also believes that whether consumption can be effectively started is the key to determining the rise and fall of cotton prices. If the relevant national rescue policies cannot be well coordinated, then cotton prices will inevitably enter a new downward cycle after the benefits such as purchase and storage, tax rebates and interest rate cuts are digested, and it is not out of reach for cotton to fall below the 10,000 yuan mark. In addition, the decline in U.S. cotton prices will also exert certain constraints on domestic cotton prices.
Zhou Jianrui wrote that since this round of economic crisis, U.S. cotton prices have continued to fall, falling from a high of 93 cents to a recent 39 cents, a drop of nearly 58%. Judging from the recent trend of U.S. cotton, the market has been weak in rebounding after oversold, and may end its rebound under the negative drag of declining crude oil and other bulk commodities. Cotton prices will hover around the 40-cent line. Calculated based on 40 cents (the exchange rate is calculated based on 6.85), the CIF import price is 7,000 yuan/ton. Even if the tariff is levied at 5%, the price will still be between 7,300 yuan and 8,700 yuan, while the price of domestic cotton is still above 10,000 yuan. The cost advantage of US cotton over domestic cotton is highlighted, which will inevitably make domestic cotton must be sold at a more reasonable price. accepted by the market.
Although analysts do not completely agree on the outlook for cotton prices, last year’s “roller coaster” cotton price situation may not be repeated this year, which should also be considered a good thing for fabric companies.
Fabric companies: Overcoming the cost “minefield”
In mid-February, the China Cotton Textile Industry Association conducted three groups to conduct a survey on the cotton textile-related industry cluster pilot areas in the four provinces of Jiangsu, Hubei, Zhejiang and Guangdong. These also include many cotton fabric manufacturing companies.
Wang Keli, a senior engineer of the China Cotton Textile Industry Association, investigated some denim fabric manufacturers in Guangdong. She revealed to reporters that most fabric companies in Guangdong purchase yarn directly for production. The current operating rate of these companies is maintained at around 70% to 80%. The order situation in March is relatively optimistic, and the order situation after April is still unclear. The cotton price issue reflected in this survey is still the difficult-to-solve problem of high VAT collection and low deductions in the cotton spinning industry. Most of the companies making such calls are cotton fabric companies with cotton purchase needs in Jiangsu, Shandong and other places.
At present, the input tax rate for cotton purchases by my country’s cotton spinning enterprises (general taxpayers) is 13%, while the product output tax rate is 17%. The 4% difference tax weakens the product competitiveness of the enterprise. In essence, it is still because The “minefield” of raw material costs cannot be overcome.
According to Qin Zhenjun, a member of the Cotton Textile Professional Committee of the China Textile Engineering Society and a professor-level senior engineer, cotton raw materials account for about 70% of the cost of pure cotton fabrics such as denim and yarn-dyed fabrics. However, if there are excellent finishing process, which is better thanThe weight can be reduced to 60%.
Some fabric companies have seized on this “10%” of costs, thus successfully crossing the cotton cost “minefield”.
As one of the top 12 companies in the denim industry, Shandong Zibo Lanyan Group has continuously improved yarn quality through the introduction of advanced equipment such as the EFS optimized cotton distribution system, USTER tester and slub yarn device, and adopted Advanced production processes such as automatic dyeing control and online monitoring have stabilized the dyeing quality. At the same time, technical transformation has been carried out on the control system, packaging and other parts of the weaving equipment. On this basis, the company also adopted denim calendering finishing technology, which greatly improved the quality of denim products and increased the added value of denim by 4 yuan per meter.
Jiang Lianfa Textile Co., Ltd., one of the top ten companies in the country’s yarn-dyed industry, regards reducing the use of cotton and developing high value-added blended fiber fabrics as its top priority in responding to the crisis. According to staff, the natural anti-wrinkle fiber fabrics, cotton and silk interwoven fabrics, XLA elastic fabrics and other products developed by the company are currently selling well in the export market.
In January this year, Shandong Huafang Co., Ltd. and the International Cotton Association of the United States signed a 2009 COTTON USA trademark licensing contract. Huafang Company’s pure cotton products will be licensed to use the US Cotton trademark in the future. This superimposed effect of “brand + brand” will give Huafang Company’s pure cotton products a higher competitive advantage than before.
“Controlled” by cotton prices, but not “controlled” by cotton prices, this may be the ultimate meaning for companies to tighten their cotton “nerves”. AAVSGREHTRY45
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