30-50% production limit! A group of knitting companies issued a joint production limit convention, w
30-50% production limit! A group of knitting companies issued a joint production limit convention, what is behind it?
Recently, the China Knitting Association issued a joint production restriction convention:
Given the current impact of the epidemic on knitting exports. Supply and demand are out of balance, and raw materials remain high, and there is vicious bidding in yarn sales. In order to alleviate the market pressure, after consultation among all member units and unanimous approval, the decision is as follows: From June 20, each enterprise will limit production by 30-50% according to its own operation. Please implement as appropriate.
According to the Joint Convention, the epidemic situation also encountered the traditional knitting off-season. Peixian knitting enterprises are under heavy pressure to accumulate. In order to ease the pressure on inventory and capital, many knitting enterprises ship at low prices, but if you lower the price, my price will be lower. The market In the vicious competition, no one can make money, but it has disrupted the market order. As a joint organization of knitting enterprises, local associations intervened and issued this joint convention, which also reflects the current plight of knitting enterprises.
According to the data, Peixian County is located in the north of Xuzhou City, Jiangsu Province, at the junction of the four provinces of Sulu, Henan and Anhui; it is a major cotton yarn knitting county in China. It is an important cotton yarn and viscose yarn knitting base. The county has 510 knitting enterprises and air spinning 1.76 million spindles , 800,000 tons of viscose yarn.
In recent years, Pei County has vigorously promoted the development of the knitting industry through measures such as "outstanding planning guidance, optimizing the development environment, promoting resource integration, eliminating backward production capacity, and playing the role of the association". In 2017, it was awarded the title of "China Viscose Yarn Production Base County" .
Insufficient orders increase
With the deepening of the traditional off-season atmosphere, the market has further declined, and many knitting companies have continued to increase their inventories due to insufficient orders.
The boss of Yifang said: "Our export orders have decreased a lot, and the demand has been reduced. The machine is also in the process of weaving inventory. Our inventory has already been 5-6 million meters. In addition to the recent increase in raw materials, the cloth price has not increased. It is equivalent to using high-priced raw materials to produce low-priced grey fabrics, which is actually a loss."
Coincidentally, a cloth owner who transferred the loom to the Henan area also revealed: "We have a lot of stock, with 78 million meters. Now we only open 50% of the loom in the field. The gray fabrics are basically sold at a loss, and some Grey cloths produced from high-priced raw materials are not sold, and if they are sold, they will lose 0.3-0.4 yuan/m."
In the storm of the second epidemic, there were no orders from the United States, there was an increase in the European sector, but there was a lack of determination to finalize the domestic demand. The domestic demand continued to shrink. The epidemic prevention materials in the market still occupied the mainstream. Lack of corresponding growth points.
Reduced prices, thrown goods, revenue decreased
The sales volume of yarn and cloth in May increased by 16.28% and 6.59% respectively compared with the previous month. In the case of insufficient demand in the downstream market, textile enterprises reduced sales prices and compressed profits to increase sales. In that month, the average monthly prices of pure cotton yarn and pure viscose yarn products decreased to varying degrees, and the prices of pure polyester yarns were relatively stable after rising, and the monthly average prices were basically flat. As of the end of May, yarn stocks and cloth stocks were basically flat month-on-month.
From January to May, the cumulative operating income of tracking companies decreased by 15.38% year-on-year, a decrease of 2.3 percentage points from the previous month, of which 85% of the companies fell year-on-year; the export delivery value decreased by 28.8% year-on-year, and the decrease rate increased by 2.5 from the previous month Percentage point; total profit decreased by 44.12% year-on-year, a decrease of about 5 percentage points from the previous month, of which 78% of companies declined year-on-year.
Slow production and low start-up rate
According to the follow-up survey on the situation of the cluster, the overall production of the cluster continued to slow down in May, and the operating rate and equipment utilization rate of enterprises continued to be at a low level. According to economic operation data, compared with the same period of last year, the cumulative output of various types of yarn tracking cluster enterprises fell by 32.4% year-on-year and cloth output fell by 36.2% year-on-year; operating income decreased by 26.4% year-on-year, and total profit decreased by 57.3% year-on-year.
According to investigation, it is understood that the start of the cluster with low-end yarns or pure cotton yarns is basically normal, and some enterprises can produce orders until early July. On the one hand, some cluster enterprises reduce inventory and speed up turnover; on the other hand, they actively adjust product structure, produce marketable products, and gradually adapt to current market conditions. As of June 15, the average operating rate of the tracking cluster was about 54%, and the utilization rate of spinning and weaving capacity was below 40%.
Reduced maternity leave or will increase
With the advent of the traditional off-season, coupled with the impact of insufficient orders, some companies have started the "vacation mode" to avoid the accumulation of inventory.
"If the raw materials fall, we will buy some to continue production, if not, we may take a holiday at the end of the month."
"In this situation, we can only sell the grey cloths to return capital, but we are not willing to lose money all the time. We may have to reduce the machine next time, and more than 300 units will be directly reduced to more than 100." Wang, who transferred to Henan, said.
The prevailing view in the industry is that construction starts when there are orders, and vacations continue without orders. Although there is hope for August, the retaliatory rebound of orders is still not expected to be strong. The fluctuation of crude oil makes the price of raw materials change rapidly, and the company's ability to resist risks is becoming weaker. It is understood that the current "downgrade" of cotton yarns and grey cloths is more common in China. Abandon the export orders with low profits, step up the domestic sales layout, take the initiative to reduce the product grade, and ensure that the products are diversified to meet customer needs.
Global research orders may be resumed in the fourth quarter
To understand the impact of the new crown epidemic on the global knitting industry chain, the International Federation of Knitwear Manufacturers (ITMF) recently conducted a fourth survey among 600 members worldwide. Research shows that knitwear orders will resume in the fourth quarter of 2020.
The survey shows that from the beginning of the pandemic on March 1, 2020 to June 8, 2020, orders for knitwear worldwide have plummeted by more than 40%. Orders in all links of the supply chain generally declined, with orders from spinning mills falling by 44% and turnover by 33%. Orders from weaving mills fell by 46% and turnover fell by 33%. Orders from apparel producers fell by 37%, and turnover fell by 31%.
In the future, knitting companies expect orders to fall by 32%. Among them, 22% of companies in Southeast Asia expect orders to decline, while 36% of companies in Asia are expected to decline. About 23% of the respondents said they expected orders to be restored in the first quarter of 2021, and 21% were expected to be restored in the second quarter of 2021. 14% of respondents are expected to recover in the third quarter of 2021, and 20% of respondents are expected to recover in the fourth quarter of 2020