The cotton spinning market in 2017 is full of uncertainties? Industry experts analyze the trends.
Release time:
2018-01-27
Source:
On March 27, the fifth expanded meeting of the fourth executive council of the China Cotton Textile Industry Association and the 2017 Cotton Textile Market Situation Analysis Conference was held in Changzhou, Jiangsu. Xie Ming, president of the Jiangsu Textile Industry Association, Duan Xiaoping, vice president of the China National Textile and Apparel Council and president of the China Chemical Fiber Industry Association, Zhu Beina, president of the China Cotton Textile Industry Association, Wang Shengmin, deputy director of the Agricultural Products Price Division of the Price Department of the National Development and Reform Commission, Yu Xiaoxin, director of the First Inspection Division of the China Fiber Inspection Bureau, Ye Jianchun, vice president of the China Cotton Textile Industry Association, Zhu Jianjun, general manager of Zhongheng Dayao Textile Technology Co., Ltd., and the general manager of the cotton department of Louis Dreyfus (China) Co., Ltd. attended the meeting.
On March 27, the fifth expanded meeting of the executive council of the China Cotton Textile Industry Association and the 2017 Cotton Textile Market Situation Analysis Conference was held in Changzhou, Jiangsu Province.
Guests attending the meeting included Xie Ming, President of the Jiangsu Textile Industry Association, Duan Xiaoping, Vice President of the China National Textile and Apparel Council and President of the China Chemical Fiber Industry Association, Zhu Beina, President of the China Cotton Textile Industry Association, Wang Shengmin, Deputy Director of the Agricultural Products Price Division of the National Development and Reform Commission, Yu Xiaoxin, Director of the First Division of the China Fiber Inspection Bureau, Ye Jianchun, Vice President of the China Cotton Textile Industry Association, Zhu Jianjun, General Manager of Zhongheng Dayao Textile Technology Co., Ltd., Li Nan, General Manager of the Cotton Department of Louis Dreyfus (China) Co., Ltd., and representatives from cotton textile enterprises.
At this meeting, the guests discussed current hot topics in the cotton textile industry, including the domestic cotton textile market situation, trends in the international cotton market, and changes in cotton target price subsidy policies.
1. Textile Industry Forecast for 2017
Duan Xiaoping, Vice President of the China National Textile and Apparel Council and President of the China Chemical Fiber Industry Association: The signs of recovery in the textile industry are not obvious.
In 2016, the economic benefits of the textile industry stabilized but slowed down, structural adjustments accelerated significantly, global layout trends became apparent, domestic sales growth remained flat, and operational quality improved. Duan Xiaoping stated that currently, the signs of recovery in the textile industry are not obvious, and the operational situation of enterprises in 2016 was not as good as the statistical data suggests; it is still too early to say that the 'industry is warming up.'
In 2017, global economic growth is expected, the outlook for developed economies will improve, and emerging markets will remain the core driving force for economic growth, but market risks are also increasing. Internationally, various factors such as President Trump's new policies, the Federal Reserve's interest rate hikes, and elections in European countries have made global trade growth exceptionally difficult. Compared to the international market, the domestic market also faces both opportunities and challenges. Factors such as the acceleration of urbanization, the relaxation of the two-child policy, advancements in internet integration, and the growing potential of the light luxury market are promoting the expansion of the domestic textile industry market. However, as the proportion of clothing expenditure declines, the deepening of rational consumption concepts, and the pursuit of cost-effectiveness increase, the development of the textile industry faces significant challenges.
Duan Xiaoping predicts that in 2017, international demand is expected to rebound under the influence of the United States. Regarding domestic sales, Duan Xiaoping pointed out that macroeconomic stability and income growth will continue to expand domestic sales. If the opportunities for consumption upgrades can be seized, improving product quality and reducing costs on the product side, and meeting consumer experience on the retail side, the domestic demand market can maintain a certain level of growth.
2. Analysis of the Domestic Cotton Textile Market Situation
Zhu Beina, President of the China Cotton Textile Industry Association:
From adapting to the new normal to leading the new normal
Since the second half of last year, the cotton textile industry's market has generally performed better than the same period in 2015, with product prices rising. However, this is not entirely driven by downstream demand, and enterprises should have a clear understanding. At the start of 2017, cotton textile enterprises overall operated well, with low product inventory levels, sufficient orders, and a slight recovery in the prosperity index.
The use of chemical fiber raw materials in the industry is becoming increasingly widespread, and cotton textile enterprises are more enthusiastic about chemical fiber raw materials, resulting in richer products and reduced risk. Market confidence among participants is beginning to recover, and factors such as the reform of the cotton system, the promotion of high taxation and low deductions, and the steady narrowing of the price gap between domestic and foreign cotton have supported improvements for domestic cotton textile enterprises. Currently, investment in Xinjiang is still growing, and enterprises are steadily moving forward, with industrial transfer and investment becoming more rational, and market dominance becoming stronger.
In the face of various unfavorable market factors, enterprises are actively responding, implementing the 'three products' strategy, and proactively adapting to the new normal. In the process of expanding profit margins, they are shifting from pursuing speed to pursuing quality, from cost-cutting to innovative development, and from focusing on development speed to enhancing product added value. It can be said that enterprises have begun to lead the new normal.
Ye Jianchun, Vice President of the China Cotton Textile Industry Association:
The competitiveness of the domestic cotton yarn market is gradually increasing.
According to statistics from the China Cotton Textile Industry Association and the China Chemical Fiber Industry Association, in 2016, the cotton fiber used in cotton textile was 7.15 million tons, a year-on-year increase of 6%; non-cotton fibers (including polyester staple fiber and viscose staple fiber) were 12.63 million tons, a year-on-year increase of 0.2%; totaling 19.78 million tons, a year-on-year increase of 2.2%; cotton fiber accounted for 36%, and yarn production was 18.84 million tons.
Since the national announcement of the release of reserve cotton in April 2016, domestic and foreign cotton prices have gradually aligned. After the release of reserve cotton ended at the end of September, the price gap between domestic and foreign cotton widened again to around 2000 yuan/ton. Currently, the price gap is around 1000 yuan/ton, and with the start of the release of reserve cotton, influenced by the pricing mechanism, the price gap is expected to narrow further.
On March 6, the release of reserve cotton began. As the release work progressed, textile enterprises slowed down their bidding pace, and the average daily transaction volume and transaction price of reserve cotton continued to decline. The reduction in the transaction price of released cotton has affected the spot market, leading to sluggish sales and a price drop of 100 to 200 yuan/ton. Currently, the price for high-quality hand-picked cotton in Xinjiang's 'Double 29' is around 16,000 yuan/ton, but the price of high-quality cotton remains firm. The interaction between futures, spot, and released prices has created a lack of support from downstream, and enterprises are in a state of wait-and-see. The quality of cotton is good, and the price still has a significant advantage.
In 2016, affected by factors such as tightened quotas, the narrowing of the price gap between domestic and foreign cotton, and the release of reserve cotton, China imported a total of 896,600 tons of cotton, a decrease of 575,900 tons year-on-year, a reduction of 39.11%. In 2017, with the national department increasing quotas and the narrowing of the price gap between domestic and foreign cotton, it is expected that the cotton import volume in 2017 will not change much compared to 2016, and the cotton usage will increase somewhat, but the increase will be limited. The import of cotton yarn is closely related to the import of cotton, and currently, the import volume of cotton yarn in China is also declining. As the price gap between domestic and foreign cotton narrows, the price advantage of imported yarn will weaken, and the competitive advantage of domestic cotton yarn will gradually increase.
3. How will the target price subsidy for cotton change?
Wang Shengmin, Deputy Director of the Agricultural Products Price Division of the National Development and Reform Commission:
The target price subsidy policy is continuously optimized.
The pilot work for the reform of cotton target prices in our country was completed in 2016. This pilot policy ensured the basic income of cotton farmers and played a good role in the reform of supply measurement, leading to the concentration of cotton production in Xinjiang and the development of cotton towards high quality and high price. The three-year pilot ended in March 2016, and during the evaluation of the cotton target price reform pilot, some issues were also discovered, such as the price being fixed for a year and adjustments being too frequent, and the subsidy method for cotton still having unscientific aspects. How should it be changed? Should the upcoming cotton target price subsidy be linked to cotton quality, etc.
Wang Shengmin stated that on March 17, the National Development and Reform Commission and the Ministry of Finance jointly issued the 'Notice on Deepening the Reform of Cotton Target Prices', which made some adjustments to the cotton target price reform, including changing the subsidy target price from a fixed one-year period to a three-year period, determining the cotton target price level based on the production costs and reasonable profits of the past three years, optimizing the subsidy method, and implementing upper limit management on the quantity of cotton in Xinjiang that enjoys target price subsidies, with the upper limit set at 85% of the national average cotton yield during the base period (2012-2014).
The next step in the cotton target price subsidy plan is to study the reform of cotton subsidy policies in the mainland and provide appropriate subsidies for cotton planting in the mainland with suitable policies. Implement the policies in Xinjiang, monitor the effects, track them in a timely manner, and allow local governments to test methods for cotton price subsidies.
Director Yu Xiaoxin of the Public Inspection Division of the China Fiber Inspection Bureau:
The quality of cotton in our country has improved significantly.
From 2011 to 2016, the average length of cotton inspected in Xinjiang was 28.78mm, 28.53mm, 28.70mm, 28.71mm, 28.56mm, and 29.05mm respectively. The micronaire value of Xinjiang cotton has shown a trend of annual increase, reflecting that cotton fibers are gradually becoming thicker. Other inspection indicators, such as color grade, are all better than those in the mainland.
It can be seen that during the cotton storage period, the length of cotton decreased significantly, while after the implementation of the cotton target price reform policy, the quality of cotton in Xinjiang has improved significantly (the length declined in 2015 due to weather reasons). Among them, the average cotton length in 2016 was the best in recent years, with the proportion of cotton lengths reaching 30mm and above reaching 11.59%, while in the years 2011 to 2015, the highest proportion of cotton lengths reaching 30mm and above was only 5%.
Yu Xiaoxin analyzed that the factors affecting cotton quality are primarily policy factors, which have a guiding effect on cotton quality. Secondly, there is the impact of climate, followed by the influence of cotton varieties and planting factors, and finally the impact of cotton processing methods. He particularly pointed out that currently about 70% of the cotton produced by the Xinjiang Production and Construction Corps is machine-harvested, and there are significant differences between the planting methods of machine-harvested cotton and hand-picked cotton, while there is no obvious difference in processing methods, which greatly damages the cotton fibers.
Yu Xiaoxin suggested continuing to deepen the reform of cotton target prices, continuing to guide cotton pricing based on quality, balancing quantity and quality, implementing price and subsidy separation, and using the demand of spinning enterprises to guide cotton production. Strengthen the management of cotton varieties and large-scale planting to improve the uniformity and consistency of cotton. Use cotton planting and processing methods that are compatible with the technology of machine-harvested cotton to comprehensively improve cotton quality.
Director Yu Xiaoxin of the Public Inspection Division of the China Fiber Inspection Bureau:
Ensure the public inspection speed of reserve cotton this year.
The rotation of reserve cotton: The implementation of package inspection for reserve cotton has been welcomed by textile enterprises, with only two quality complaints regarding reserve cotton rotation in 2016. For this year's rotation, to avoid a shortage of supply, the China Fiber Inspection Bureau began the inspection work for reserve cotton in 2017 starting in October 2016, so this year's reserve cotton rotation, at the current pace, the China Fiber Inspection Bureau can ensure the public inspection speed, ensuring that the cotton purchased by enterprises can be quickly released from storage.
Chairman Sun Ying'an of Hubei Xiaomian Industrial Group Co., Ltd.:
Suggest reducing the costs of reserve cotton.
Sun Ying'an introduced that Xiaomian Company mainly produces pure cotton yarns ranging from 5 to 100 counts, and every year, the company requires a large amount of reserve cotton, with 80% of the company's raw materials sourced from reserve cotton. Last year, the implementation of package inspection for reserve cotton rotation indeed ensured the quality of reserve cotton purchased by enterprises, which the enterprises were very satisfied with.
Sun Ying'an stated that the promotion of reserve cotton rotation is continuously improving, but personally, he believes that the storage fee of 45 yuan/ton for reserve cotton is slightly high and suggests that the rotation fee for reserve cotton could be reduced.
5. Domestic cotton market demand forecast.
Li Nan, General Manager of Louis Dreyfus (China) Co., Ltd. Cotton Division:
The world cotton market is transitioning from oversupply to a supply gap.
The global cotton industry has reached a turning point, with the area of cotton in the world decreasing from 36.11 million hectares in 2011/2012 to 29.31 million hectares in 2016/2017, a decrease of over 20%. Low prices have led to cotton consumption rising from 22.7 million tons in 2011/2012 to 24.5 million tons in 2016/2017, an increase of 8%. The oversupply has turned into a supply gap, and by the end of this year, the world’s year-end inventory is expected to decrease from the record of 24.4 million tons in 2014/2015 to 19.6 million tons, a decrease of 20%. Currently, global cotton consumption exceeds production by 8%, but growth is slow, with 2/3 of the world's polyester production capacity in China, and prices only half that of cotton. The use of synthetic fibers in China's textile production is increasing, and global cotton consumption is gradually recovering to 24 million tons, while global cotton production is only 22 million tons. China's cotton policy has a huge impact on consumption, leading to slow growth in global cotton consumption.
Looking ahead to the 2016/2017 fiscal year, global cotton consumption is expected to exceed production once again, with a projected increase of 2-3%. The low-price rotation of reserve cotton in China is expected to promote consumption, and the world’s year-end inventory is expected to decrease by 1.5 to 1.7 million tons. It is estimated that the future cotton supply gap in our country will be around 3 million tons, and the national reserve cotton may reach a relatively ideal low level in the 2018/2019 fiscal year, assuming it is in the range of 2.6 to 3.3 million tons. The reserves will not meet the supply gap and will have to increase production or imports to resolve it.
6. Hot fabric forecast for 2017.
Zhu Jianjun, General Manager of Zhongheng Dayao Textile Technology Co., Ltd.:
Downstream demand determines upstream production strategy.
Zhu Jianjun analyzed the characteristics of the downstream market in the cotton textile industry—yarn and fabric products. He stated, "In 2017/2018, the trend for cotton fiber woven products will be smaller batch sizes, with cotton blended with all fibers, and almost no fabric will be without stretch. Super stretch and super softness will become the biggest demand. Yarn must be able to achieve both black and white, meaning it can be dyed black while also being able to be bleached." He predicts that in 2017/2018, specialty coated fabrics, double-layer fabrics, four-way stretch fabrics, high-stretch twill, large jacquard, hollow fabrics, single-sided dyed fabrics, and shiny materials will become popular trends in textile and apparel fabrics.
Zhu Jianjun believes that good companies have several key characteristics: they manage raw materials well, produce good products, and innovate their business models effectively. Companies that excel in product quality also tend to have consistent quality, sustainable sourcing, and rapid product updates. To produce good products, it is essential to have stable raw materials; otherwise, orders are likely to be lost. It is important to establish unique features and main products; otherwise, there is a risk of accumulating excessive inventory. The pricing of new product developments should focus on cost-effectiveness to avoid "overquality."
In addition, the meeting reviewed and approved changes to the governing and member units of the China Cotton Textile Industry Association.
Related Information