According to the tracking data of the China Cotton Textile Association (referred to as the “CCTA”) in March 2020, the production and sales situation of the cotton textile industry has improved month-on-month with the acceleration of the company’s resumption of production. Since late March, the COVID-19 pandemic has spread globally, export orders have plummeted, and production has gradually slowed. Recently, pressure on orders and inventories of cotton textile companies has further increased.
Raw material purchases increased month-on-month, and cotton prices stabilized after falling. In March 2020, the tracking company’s raw material procurement increased by 101.35% month-on-month, of which about 92% of the company’s raw material procurement increased month-on-month. Raw cotton purchases increased by 107.20% month-on-month. In March, the price of domestic standard grade cotton averaged about 12,000 yuan per ton, down 9.5% month-on-month, continuing the downward trend in February. The reserve cotton round lasted 4 months, and the actual turnover was 371,600 tons, with a turnover rate of 47%, which played a significant role in supporting domestic cotton prices. Due to the intensification of overseas pandemics, domestic cotton futures contract prices in recent months fell below 10,000 yuan per ton. Countries have taken measures to rescue the market one after another, and domestic cotton prices rose.
The purchase volume of imported cotton in raw cotton was basically the same as last month. According to data from the General Administration of Customs, China imported 610,000 tons of cotton in the first quarter, a year-on-year decrease of 8%. The average monthly price of the international cotton price A index in March was 67.69 cents/lb, down 11.6% month-on-month, which was greater than the decline in domestic cotton prices and continued the downward trend.
The purchase volume of non-cotton fiber in raw materials increased by 91.33% month-on-month. In March, the average monthly price of polyester staple fiber fell by more than 10% month-on-month; the average monthly price of viscose staple fiber continued to be basically flat month-on-month.
Both raw material consumption and inventories declined year-on-year. In March, the raw material consumption of cotton textile enterprises increased by 108.46% month-on-month, and about 95% of the enterprises increased month-on-month. In the first quarter, the cumulative raw material consumption of tracking enterprises increased by 24.32% year-on-year. As of the end of March, raw material inventories fell by 3.09% month-on-month, of which 95% of enterprises’ raw cotton inventories increased month-on-month; 91% of non-cotton fiber inventories increased month-on-month. Compared with the same period last year, raw material inventories fell by about 16% year-on-year.
The cumulative output of yarn and cloth decreased by 20% year-on-year, and equipment utilization rate was less than 90%. Tracking enterprise data shows that the output of yarn and cloth in March increased by 113.27% and 90.57% respectively. In the first quarter, the cumulative yarn output and cloth output of tracking enterprises decreased by 23.91% and 20.20% respectively year-on-year. In March, the upstream and downstream markets of the industrial chain gradually recovered, and enterprises accelerated the resumption of production. In addition, the production base in February was relatively low, which led to a substantial increase in output, but it has not yet recovered to the level of the same period last year.
As of the end of March, the utilization rate of spinning and weaving equipment of tracking enterprises was around 88%, which was 10 and 14 percentage points lower than the same period of the previous year. Among them, 77% of the enterprises’ spinning equipment utilization rate is above 80%, 12 percentage points higher than last month; 80% of enterprises’ weaving equipment utilization rate is above 80%, 2 percentage points higher than last month. It is understood that more and more companies switch to mask production.
Recently, export orders have been largely cancelled or delayed, and the production of enterprises has been greatly affected. According to the enterprises, orders for direct exports and indirect exports have decreased significantly, and the pressure on export-to-domestic sales has been greater. Some small and medium-sized enterprises’ orders for processing from large enterprises have also decreased accordingly. The operating rate declined, and weaving companies are more obvious than spinning companies.
The sales volume and price of yarn and cloth fell, and the total profit was halved year-on-year. Tracking enterprise data shows that the sales volume of yarn and cloth in March increased by 143.56% and 108.55% respectively. Affected by the global pandemic situation and the decline in raw material prices, the monthly average prices of various yarn and cloth products decreased to varying degrees in that month. From the perspective of the decline, the price of polyester yarn is higher than that of pure cotton yarn and viscose yarn.
As of the end of March, the percentage of loss-making companies was 45.30%. In the first quarter, the cumulative operating income of tracking companies decreased by 20.45% year-on-year, of which 88% of companies had a year-on-year decrease; the total profit decreased by 48.11% year-on-year, of which 77% of companies had a year-on-year decrease.
As of the end of March, yarn inventory increased by 1.74% month-on-month, and cloth inventory increased by 2.96% month-on-month. Since late March, the company’s production has begun to show signs of slowing down. In order to maintain operation and stabilize employees, the company has to increase production of conventional products, and inventory pressure has increased.
The cluster production improved in the early stage and slowed down in the later stage. According to the follow-up survey on the situation of the cluster, with the stabilization of the pandemic situation in the first half of March, the operating rate, equipment utilization rate, and personnel arrival rate of each cluster gradually increased. Starting in late March, affected by the foreign trade situation, the company’s production slowed down significantly. As of April 19, the average operating rate of the tracking cluster is about 57%, of which the operating rate of enterprises above the designated size is about 78%, and the operating rate of enterprises below the designated size is insufficient; the utilization rate of spinning and weaving equipment is below 40%.
According to the cumulative economic operation data from January to March 2020, through comparative analysis with the data of the same period last year, indicators such as the output and output value of the tracking cluster in March decreased significantly. In terms of output, the cumulative output of various types of yarn in cluster enterprises decreased by 33.6% year-on-year, and the output of cloth decreased by 37.2% year-on-year; in terms of economic indicators, the operating income of cluster companies decreased by 24.5% year-on-year, and the total profit decreased by 53.4% year-on-year. In March, the overall production of the cluster showed a recovery trend, and most enterprises mainly focused on catching orders before the holiday. Affected by the pandemic situation, there are fewer new orders, the staff arrival rate is still insufficient, and the company’s operating rate is relatively low, resulting in a year-on-year decline in output value.
Source: China Cotton Textile Association