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The downturn in the textile industry makes domestic cotton policy dilemma

  • Categories:Industry News
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  • Time of issue:2018-01-29 17:46
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(Summary description)As far as the cotton market is concerned, in addition to bearing external pressures, there are also various difficulties that are indescribable. The first is the weak global downstream textile consumption, leading to high inventories.

The downturn in the textile industry makes domestic cotton policy dilemma

(Summary description)As far as the cotton market is concerned, in addition to bearing external pressures, there are also various difficulties that are indescribable. The first is the weak global downstream textile consumption, leading to high inventories.

  • Categories:Industry News
  • Author:
  • Origin:
  • Time of issue:2018-01-29 17:46
  • Views:
Information

As far as the cotton market is concerned, in addition to bearing external pressures, there are also various difficulties that are indescribable. The first is the weak global downstream textile consumption, leading to high inventories.

For the forecast of production, sales and inventory data, the USDA and the International Cotton Advisory Committee have different statistical calibers, but their views are basically the same.

Since 2012, the U.S. Department of Agriculture has made relatively large increases in inventory data in its monthly supply and demand reports. The forecast of 13.232 million tons of global stocks in the February supply and demand report was adjusted to 13.569 million tons in the March report and 14.386 million tons in the April supply and demand report.

Among them, the April report mainly raised India’s initial stocks by 762,000 tons. The May supply and demand report continued to raise global cotton ending stocks and lower cotton consumption. China’s inventory-to-consumption ratio is as high as 68.4%. After several adjustments, the USDA’s 2011/2012 global consumption forecast differs by 2.5 million tons. It reduced China’s consumption by 1.2 million tons to just over 9 million tons.

Due to the cotton price protection policy launched by China last year, a large amount of foreign cotton has been concentrated in the country, and China's domestic inventory problems have become even more serious. The International Cotton Advisory Committee predicts that China’s stocks will reach 5 million tons this year, more than doubled year-on-year, but stocks in other countries and regions around the world have increased by about 14% to 8.1 million tons.

The sluggish domestic textile demand and high inventory data make it difficult for domestic policymakers.

On the one hand, the situation of imported cotton premiums started last year and has continued to the present. The price difference between inside and outside is as high as several thousand yuan, and China's imports are heavy. Issuing or not issuing import quotas is a headache for the country.

Quotas are issued, and the price of foreign cotton has received stable support. The national policy price protection since last year is not only for domestic cotton farmers. The large amount of imports has made China's money and efforts to become the savior of global cotton farmers in the economic downturn.

This business is a loss no matter how. If a large amount of imported inventory can be put into operation, after a period of high cost digestion, it can always return to downstream consumption.

But the problem is that the sluggish downstream does not provide such an opportunity. Just like a dumb eating coptis, how to digest so much cotton in the future is also a problem. If quotas are not issued, domestic textile companies will use high-cost cotton, and domestic companies will also suffer losses in the face of major competitors with cheaper human resources such as Southeast Asia.

Not to mention the adoption of zero tariffs or other measures to support imported cotton by other countries, which will further reduce the purchase cost of enterprises, thereby widening the gap in cotton spinning costs between my country and other countries. The government must not lose its trust in the farmers' commitment to purchasing and storing. The benefits of cotton farmers on one side and the benefits of textile companies on the other hand may not have the best of both worlds.

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