Spinning Clothes Cost Pressure Relief Supply Exceeds Demand

1. cost pressure relief

07 years ago, rising cost has become a major problem facing the industry.

Many factors, including raw materials, labor force price rise, rapid appreciation of RMB, export tax rebate rate and loan interest rate increase, make textile and garment enterprises' cost pressure unbearable, and a number of enterprises shut down or close down.

In the near future, with the falling prices of raw materials and the gradual introduction of stimulating economic policies, the cost pressure of the industry in the past 09 years is expected to ease.

1.1. cotton prices fell sharply at home and abroad

In the past 08 years, the price of cotton has been fluctuating sharply. The price of American cotton spot (equivalent to domestic 328 cotton) rose rapidly in March, reaching the highest value of 82.59 cents / pound in March.

By the end of October, the spot price of China's high-grade cotton was only 45.17 US dollars / pound, down 45.31% from the highest point.

According to the current exchange rate conversion, we do not consider other import costs such as sliding tax and so on, equivalent to 6851 yuan / ton.

Domestic cotton prices basically run at 13000 yuan / ton -14000 yuan / ton in 1-8 months.

After the new cotton market came into operation in September, cotton prices began to fall as exports declined significantly.

At present, the spot price of domestic 328 cotton is 11779 yuan / ton, 13.79% lower than the beginning of the year.

Other alternative fiber prices also dropped to varying degrees. By the end of October, viscose staple fiber price was 15200 yuan / ton, polyester staple fiber price was 7200 yuan / ton, compared with the beginning of this year, it decreased by 30.28% and 36.84% respectively.

At present, domestic cotton prices have been lower than cotton farmers' cost price (about 12500 yuan / ton).

In October of 08, the government issued two policies of purchasing and storing two times in succession, buying cotton 1 million 220 thousand tons to stabilize cotton price at the price of $12600 / ton.

It is estimated that a new policy of purchasing and storing will be introduced in the future, and there is little room for cotton prices to continue to fall.

However, the domestic and foreign cotton price ratio is 1.74, and the cotton and polyester staple fiber price ratio is 1.66, indicating that domestic cotton prices are still at a relatively high level.

Coupled with the decline in demand for textiles at home and abroad, the possibility of short-term cotton prices going up sharply is also small.

Cotton prices are expected to remain low for 09 years.

Textile enterprises usually have 2-3 months stock of raw materials.

In the early stage of raw material price reduction, the price of products decreases, and the raw materials of stock are still at a high price, and the profit space of enterprises is compressed.

As the main raw material prices of the industry began to accelerate in September, the industry profits in the fourth quarter of 08 were most severely affected.

If raw material prices will remain stable for 09 years, the cost of raw materials will be eased after high priced inventory is consumed.

1.2. rising labor costs

Over the years, the average wage of the textile industry is less than 15% of the national average wage of manufacturing industry, and there is a reason for its rise.

At the beginning of 08, with the implementation of the new labor contract law and the labor shortage caused by the rapid development of manufacturing industry, the wages of textile workers increased rapidly, and the average wages of most enterprises increased by more than 20%.

This makes labour intensive textile and garment enterprises worse.

Since the second half of this year, with the credit crunch and the deterioration of the economic environment, most enterprises have reduced production and some have even failed.

The shortage of labour force has eased significantly, thus inhibiting the rise in labor prices.

Recently, the state has issued a policy of postpone the adjustment of the minimum wage standard. It is estimated that the pressure of labor cost in textile and garment enterprises will be greatly alleviated in 09 years.

　　1.3. 人民幣升值步伐放緩

From the beginning of 08 to the end of October, the renminbi appreciated by 6.9% against the US dollar, and appreciated 22.18% against the euro. In October, the renminbi appreciated 14.6% against the euro.

The appreciation of the renminbi against the major trading currencies has greatly reduced the competitiveness of China's textile exports, which has led to a decline in the growth rate of orders. On the other hand, because of the generally weak bargaining power of domestic textile enterprises, it is difficult to pass the increase in the cost of the appreciation of the local currency, and the gross profit margin has declined.

In the second half of 08 years, the exchange rate of the RMB against the US dollar was basically stable in the range of 6.8 to 6.9, and there were signs of stabilization after the substantial appreciation of the euro.

The economic circle generally expects that the appreciation of RMB will slow down in 09 years, and the negative impact of the appreciation of the local currency on the industry will be weakened.

　　1.4. 政策暖風頻吹

1.4.1. "moderately loose" monetary policy

Starting in 08 September, the interest rate of RMB loans decreased three times in a row. The benchmark lending rate for one year fell to 6.66% from 7.47% at the highest point, a 81 basis point decline.

Recently, the central bank announced the implementation of the "moderately loose" monetary policy. It has introduced measures to abolish the credit limit of commercial banks, increase credit support to small and medium-sized enterprises, encourage and guide financial institutions to expand the scale of export credit, and other measures conducive to small and medium-sized enterprises. It is estimated that there will still be room for big reduction in lending rates in the 09 years.

The change of monetary policy will reduce the cost of enterprise financing in 09 years, and the textile industry will mainly benefit from the loose monetary policy.

　　1.4.2. 出口退稅率連續上調

The export rebate rate of textile and clothing increased to 14% after two adjustments in August and November.

It is assumed that the export growth rate of 08 years is 6% (the growth rate of 8.6% in the previous October). The exchange rate of RMB against the US dollar is 6.8, and the proportion of general trade in exports is 70%. The static calculation of the export tax rebate rate has contributed nearly 10 billion yuan to the total profits of 08 years, and has increased the 08 year operating profit margin of the industry by 0.35 percentage points.

Recently, the State Council has promulgated six policy measures to promote the development of light textile industry. It mentioned that we should continue to increase the export tax rebate rate of textiles and garments.

We believe that if the export of textile and clothing in the four quarter or the first quarter of 09 has come down considerably, the possibility that the tax rebate rate will gradually increase to 17% will exist.

We conducted a sensitivity analysis on the impact of the export tax rebate rate increase on the 09 year's industry profits. The results showed that the export rebate rate increased from 11% to 15%, 16% and 17% respectively, and the contribution to the 09 year gross profit of the industry was 33 billion 700 million, 42 billion 100 million and 50 billion 500 million yuan respectively, accounting for 31%, 31% and 31% of the total profits of the industry.

In addition to the export tax rebate rate increase, the measures promulgated by the State Council also include the suspension of the margin of the textile processing trade account.