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Compared to previous years, South American orders decreased by approximately 30% to 40% in the first nine months of this year. The main reason is the imbalanced supply and demand relationship, with more suppliers in the textile industry, and the impact of the pandemic on foreign tourism in the past three years. Their economy is not particularly good, and crude oil prices are also rising, so the overall purchasing power has decreased, "said Fuqi Textile Linxi.
Energy crisis combined with inflation, where is the path for Chinese enterprises
The disappearance of demand in Europe and America.
Due to energy issues, the overall economic environment for foreign customers is like this. Although clothing is indeed a necessity, compared to food and energy, it is not as important.
After the outbreak of the Russia-Ukraine conflict, Russia's natural gas supply to Europe decreased, and Europe's electricity and heating were tight. Energy prices soared, raising prices.
As a result, consumer demand in Europe and America has been suppressed.
A recent report by Morgan Stanley pointed out that many companies are facing excess inventory. A shipper survey conducted by Morgan Stanley on approximately 100 companies showed a 40% year-on-year decrease in order volume. In September, the import volume of US containers decreased by 11% year-on-year.
Unnecessary consumption has decreased, and the risk of textile orders has emerged.
The decline trend of overseas textile orders is confirmed in China's export data.
Customs data shows that since the beginning of this year, the growth rate of export value of textile yarn, fabrics and their products has significantly decreased:
In January, the year-on-year growth rate was 23.9%, and by September, the monthly growth rate had dropped to 1.8%.
In China, it takes at least 60 to 90 days for textiles to be customized, yarn, fabric, printed and dyed, and ready to wear. Goods also need to float at sea for over a month, or even two to three months, before they can reach the European market. Normally, Chinese companies are already taking on orders for next year. However, giant companies such as Adidas, Nike, and Andemar are all reducing demand, so many companies are facing difficulties in taking orders.
Clothing companies are also feeling a decline in orders. The overall environment has a significant impact, and orders have indeed shrunk significantly. On the other hand, the labor costs in China are too high, and customers are transferring orders to Myanmar, India, and Bangladesh. From e-commerce and garment factories to textile factories, fabric factories, yarn factories, and dye factories, China's textile industry has been in a slump this year. To some extent, this may indicate a downward trend in China's textile export data in the first half of next year (2023).
The biggest obstacle to exports is not the inconvenience of transportation with customers during the pandemic; It's not that emerging economies have taken away Chinese textile orders
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But global consumption is sluggish, and demand is gone.
The special trade game between China and the United States is not enough to explain the decrease in textile export orders. In Southeast Asia and South Asia, which are exempt from this problem, textile orders are also sharply decreasing. The domestic textile industry media "CHINA TEXTILE" recently reported that the Andhra Pradesh Textile Association in India announced that due to an unprecedented decrease in demand, approximately 125 to 135 factories will stop production. Currently, the operating rates of spinning mills in other Indian states are between 40% and 60%. In Vietnam, Fan Chunhong, Chairman of the Ho Chi Minh City Textile and Embroidery Association, stated that in the first eight months of this year, Vietnam's textile and clothing exports reached $30.1 billion, but this mainly occurred in the first few months of this year. Since July, Vietnamese enterprises have also faced a series of difficulties such as a decrease in export orders.
In the final analysis, under the dual impact of the energy crisis and inflation, the non essential consumption of developed economies in Europe and America is decreasing.
According to data released by the US Department of Commerce on October 14th, the quarterly growth rate of US clothing retail in September was about 3.1% year-on-year. Excluding the impact of inflation, it is expected to have a negative year-on-year growth (September clothing CPI+5.5% year-on-year). It can be seen that the actual clothing consumption in the United States has been decreasing.
Usually, the depreciation of the Chinese yuan against the US dollar is seen as a positive factor for companies' exports.
However, there are not many optimistic foreign trade enterprises. One is that customers will negotiate and lower prices during negotiations. Secondly, if the exchange rate fluctuates too much, customers may request a delay in payment or wait for more favorable prices to appear, resulting in delayed orders. The third is that many raw materials in the textile industry are extracted from oil and ultimately need to be imported in RMB. The increase in exchange rate costs will ultimately be passed on to domestic suppliers.
The competitive and cooperative relationship with Southeast Asia will become a key proposition for China.
Despite a decrease in global total demand, the structure of orders is also undergoing subtle changes. Taking the textile industry as an example, data from the China Textile Import and Export Chamber of Commerce shows that from January to August, the United States imported $102.14 billion in textile and clothing, with imports from China accounting for 27.1%, a year-on-year decrease of 3.3 percentage points; Imports from Vietnam, India, Bangladesh, and Indonesia increased by 1.7, 0.8, 1.7, and 1 percentage point respectively. The overall supply power of ASEAN cannot be underestimated.
Some weaknesses in China's industry are emerging.
For example, the textile industry lacks high-tech original fabrics. Secondly, the leading domestic textile refining enterprises have almost overlapping products. China's refining projects have a huge production capacity and a large supply of materials, but they are still unable to develop the most high-end fabrics. Once the refining equipment of many large textile enterprises is started, it is difficult to stop when encountering bad market conditions. Otherwise, they will face huge restart costs and can only force production. Chinese enterprises are still engaging in internal competition in terms of quantity.
But at the same time, there is no need to be too pessimistic. On the other hand, Chinese enterprises still have many advantages. China has a comprehensive and efficient industrial system, leading infrastructure, and a developed industrial logistics system, which is difficult for Southeast Asian countries to catch up with in the short term.
In addition, China's labor force has a high quality and is hardworking, making it less resistant to overtime than Southeast Asian workers; Chinese enterprises have high sensitivity to the market and strong adaptability; Foreign companies have not yet cultivated mature mid to senior managers in Southeast Asia, and factory management costs are higher. In addition, China's ultra large market will continue to consolidate its own advantages in the industrial chain and supply chain.
Now, every enterprise needs to have a sense of urgency,
Developing customers through multiple channels,
Actively going out to respond to market changes, accumulating more 'food' and using more cash flow to respond to crises.
Difficulties come year after year, and they are different from year to year. Every year, there are businesses that go bankrupt, as well as new businesses that are added. There is always a market, and it depends on how entrepreneurs perceive crises. Only when there is a crisis can there be opportunities.