The price of cotton futures was 16,385 yuan per ton. It is up about 60% from its lows in the first half of last year.
Such a huge increase in a short period of time for the textile industry will have what impact? Consumers around the purchase of socks, towels and other cotton products, whether it will be affected by a large price rise?
Prices of raw materials such as cotton soared
Costs for textile companies rose nearly 30 per cent
At a yarn factory in Shaoxing, Zhejiang province, a reporter saw tons of lint being dyed in a machine before it was turned into yarn for sale to fabric and garment factories downstream.
Factory director Ji Guomiao told reporters that the biggest problem facing enterprises is the price of raw material cotton has been rising.
Ji Guomiao told reporters that because the yarn enterprise is the first to receive orders after production, so after the contract is signed, the shipment price is difficult to modify, and the raw materials continue to rise during this period, will lead to a significant increase in costs, compress the profit space of the enterprise. In addition, high yarn prices also make it difficult for downstream fabric factories to accept.
Ji Guomiao, chairman of Zhejiang Shaoxing Ji Ma Liang Silk New Material Co., Ltd. : When the price of raw materials goes up by 20%, our price goes up by more than 15%.
Since cotton has been rising, yarn prices have also been rising. As of March 3, Zhengshangsuo’s main price of cotton yarn was 24,235 yuan per ton, up more than 30 percent from the April 2020 low.
Reporters have learned that yarn enterprises have begun to increase the quantity of cotton stockpile, but because of the storage of cotton requirements more, so the stock of enterprises to increase limited.
In addition, the price of textile raw materials such as spandex has also risen sharply, which also leads to the cost of the downstream fabric factory of yarn is also further increased.
Industry insiders told reporters that although the current yarn price rise led to downstream fabric factories and garment factories produced a wait-and-see mood. But with downstream orders saturated, higher upstream raw material prices will eventually trickle down, along with fabric and clothing prices.
Orders have exploded
Yarn companies are profitable
What is the cause of such a rise in cotton prices? Will the rise in cotton be the result of increased downstream demand?
From the second half of 2020, the price of cotton began to rise rapidly. Yarn companies, though, have seen profits shrink as cotton prices rise, but continued growth in orders has kept them in good shape.
Reporters have learned that the current production orders of textile enterprises are generally arranged in April and May, and a large number of enterprises use 24-hour operation, people rest and machines do not rest for production. Although profit margins are down, overall profits are still good.
Industry insiders told reporters that domestic cotton prices rose on the reason for demand growth. Due to the saturation of orders, domestic textile enterprises are actively purchasing raw materials. At the end of January, the inventory of cotton industry in the warehouse of national textile enterprises was 930,500 tons, 128,200 tons more than the end of last month, and 204,000 tons more than the same period last year. Yarn sales, on the other hand, are accelerating. As of February 25, the number of days of yarn product bank deposit in textile enterprises was 10.6 days, down 56.7 percent year on year.
Clothing towels and other cotton products prices may rise by 10 per cent
As the price of raw materials of the cotton textile industry chain has risen so much, will the price of cotton products also rise so much? Will the price of textiles such as towels and socks, which you buy on a daily basis, increase dramatically?
In the interview, the reporter learned that this year, affected by the epidemic, not only yarn and fabric orders transferred from Southeast Asia to China, even the clothing and cotton products industry also appeared the phenomenon of order backflow.