Embarrassment Of Textile Industry'S Foreign Trade Recovery

Near the end of 2020, China's foreign trade surplus reached a record high, exceeding US $75.4 billion in November. Behind this figure was the export growth rate of 21.1% in the same month. In May, this figure was still negative.

China's foreign trade situation has reversed in half a year. In June 2020, the general office of the State Council issued a document supporting the conversion of export products to domestic sales. The rescue of foreign trade enterprises was the topic at that time.

How did the reversal happen?

"Affected by the epidemic situation, we started to work in March 2020, and almost no shipment was made in March and April, but we have been very busy since May, and the annual performance is better than that in 2019." The person in charge of a purchasing agency in Yiwu told China News Weekly that he helped European customers purchase products in the Chinese market. "The export volume of individual products has increased sharply, especially for indoor products, such as small humidifiers for indoor use after the arrival of the heating season."

According to the national key export commodities list released by the General Administration of Customs in November 2020, it can be found that the commodities with the highest cumulative export value from January to November compared with the same period in 2019 were medical instruments and devices, with an increase of 42.5%. Textile yarn, fabrics and products with a year-on-year growth of 31% ranked the second, with a growth rate of nearly 21% in the same month.

As a small profit commodity, with the rising labor costs, Sino US trade war and other factors, some textile foreign trade orders have already flowed out of China. "The Sino US trade war has an impact on the European market and the Australian market. They subconsciously follow the United States. In 2018, many orders began to transfer, and some companies simply stopped placing orders with Chinese enterprises." A person in charge of the foreign trade department of a textile enterprise told China News Weekly.

The foreign trade of China's textile industry will grow "unexpectedly" in 2020. However, it is difficult for enterprises to make profits behind it.

Orders surge

In fact, before November 2020, China's textile exports performed well. In April, the year-on-year growth rate of exports turned positive. In May, the export volume exceeded 20 billion US dollars, with a year-on-year growth of 77.3%.

But in the memories of some textile enterprise leaders, April and may was the most difficult period for export. "In the first half of 2020, the export of textiles is mainly driven by masks, which should account for more than half of textile exports. What drives textile exports is certainly not conventional textiles. At that time, the export of enterprises encountered unprecedented stagnation. " The person in charge of the foreign trade department of the textile enterprise mentioned above. According to the data of the General Administration of customs, in the first four months of 2020, China's exports of masks to the United States, Japan and Europe accounted for 1 / 3, 2 / 5 and 1 / 2 respectively.

He told China News Weekly that after the supply of large quantities of masks is in place, the pulling effect of mask export in the second half of 2020 will be small. "Now the demand and price have declined. The price of masks may be only one tenth of that in the first half of the year. The recovery of foreign trade in the textile industry in the second half of the year is definitely caused by the rebound of traditional textile exports."

"At present, the orders received have been arranged to March 2021, which is rare in history. Generally, orders for home textile products such as towels will be arranged for about one month to one and a half months." Fu Ge group director, deputy general manager Yu conghai told China News Weekly. Vosges group is China's largest exporter of home textiles, mainly exporting towels, bedding and other home textile products, accounting for 80% - 85% of the export sales, and the sales volume of the American market reaches 270 million to 280 million US dollars.

According to Yu conghai, the export volume of the American market has increased greatly from the second half of 2020, about 15% per month.

In the fourth quarter, the export volume of towel to the United States exceeded 50 million US dollars. Even before the outbreak, such a single quarter export volume was not easy to reach. "The factory has been operating at full capacity since the second half of the year, and some outsourcing is needed. This momentum will continue until the first quarter of 2021 without any problem."

In normal years, the peak period of foreign trade orders is from October to march of the following year. In previous years, vosge group's order for beach towel will increase to prepare for the next summer, but this year the order volume of beach towel is very small. With the increase of orders in the American market in the second half of 2020, some changes have taken place in the structure of export products, and orders for household and indoor products have increased significantly. "The overall performance of home textile products is good." Yu conghai said.

According to the data of the National Bureau of statistics, from January to September 2020, the export delivery value of domestic textile enterprises above designated size decreased by 6.05% year-on-year, but it has achieved positive growth in the third quarter, with a growth rate of 9.34%, and the growth rate in September reached 19.56%.

In addition to home textile products, fabric export orders are also surging. A quarter of the world's fabrics are traded in Keqiao, Shaoxing every year. The foreign trade prosperity index of Keqiao Textile index released by the local government shows that in November 2020, it will increase by 10.4% year-on-year, reaching 911.77 points, the highest value since 2019.

Yan Liangmin, the person in charge of Shaoxing Zehao Trading Co., Ltd., told China News Weekly that 90% of its products were exported to the American market. "Since August, the export volume of each month has increased compared with the same period last year. Through the growth of August to November, the loss in front of us has been made up for. In some months, the increase of export volume has even exceeded 50%." But he told reporters that the annual export volume of enterprises will still drop by about 6%.

This seems to be the consensus of many textile enterprises interviewed. Although foreign trade orders surged in the second half of the year, it is still difficult to make up for the losses in the first half of the year. The data provided by Keqiao District Bureau of commerce also shows that even after the order growth in the third quarter, the cumulative export volume of enterprises in the whole region will drop by more than 20% from January to October 2020.

"Even if there is retaliatory growth in the second half of the year, it has not made up for the loss of export share in the first half of the year. Especially in the second quarter, the year-on-year decline was large. " Yu conghai said.

So, in the first half of 2020, in the case of weak conventional textile exports, where does the surge in foreign trade orders in the second half of 2020 come from?

Order backflow

"I'm afraid India also takes the route of mass immunization, which is very difficult to control." The person in charge of a home textile enterprise is very concerned about the new crown epidemic situation in India. "Indian enterprises are our main competitors. At present, only a few large factories are operating, and they are not operating at full capacity. Some small and medium-sized factories directly shut down, resulting in more orders returning from India in the second half of the year."

However, he stressed that "India has not completely lost its combat effectiveness", but the operation rate of the factory is only about 80%, otherwise, more orders will be returned. "We have learned from some customers that they are still placing orders for Indian companies, but they are looking for 'backup' in China considering the risk."

"We have very few new customers now, mainly some old customers who re deliver the orders that were transferred to India to us." In the impression of Wang Qijun, director of Vosges group and general manager of the three home textile companies, orders began to flow back in July and August. "The trend of backflow in October will be more obvious. Many orders for Christmas season products will be temporarily" rescued ". Some orders have already been sent to Indian enterprises, and even have been proofed and withdrawn to China. The main reason is that Indian enterprises can't deliver goods on time, but in the Christmas season Products can't miss time. "

"The delivery time of Indian enterprises has always been a disadvantage. It used to take two months, now it may take three months. Some "urgent orders" from American customers need us to break the rules. Originally, our delivery time was 30 to 40 days after the confirmation of samples, which was very fast, but they may need to deliver the samples in two weeks after confirming the samples. This puts a lot of pressure on the factory, and it will also increase the cost. The main reason for receiving orders is to show the strength. " Wang Qijun believes that in addition to the advantage of delivery time, the return of orders from India also shows that the prices of Chinese enterprises' products are not exorbitant.

"In the second half of this year, orders returned from India to China are mainly mid end home textile products." The person in charge of the above-mentioned home textile enterprises said that in recent years, Indian enterprises have posed great challenges to Chinese enterprises in terms of medium and low-end home textile products. India is particularly good at medium and low-end projects, with cheap raw materials and low labor costs. In addition, China also has tariff restrictions, resulting in a lot of such projects flowing to India, such as white towels commonly seen in restaurants.

Take towels as an example, the price difference between China and India is between 10% and 30%, which does not take into account the additional 7.5% tariff imposed due to the Sino US trade war.

"After the epidemic, some of the returned orders will leave. For example, products that are extremely price sensitive will go, even if there is only a 5% price difference. We are also prepared for this." However, in Wang Qijun's view, among the factors supporting the growth of export orders to the United States in the second half of 2020, the order backflow may only account for about 30%, and "more than 60% of the reason is the counterattack of overseas demand".

"Order backflow does not apply to explain the growth in total textile export orders. For example, the pure polyester bedding made by some domestic enterprises was cancelled at the 7.5% trade war tariff, and the export volume increased sharply. These products were not the strong points of India or Southeast Asia. The increase of export mainly came from the increase of market demand in the United States, which directly squeezed out some low-end cotton bedding products made in India and Pakistan. " An industry source in the textile industry told China News Weekly that "American consumers will retaliate for consumption in the second half of 2020, and the demand for home textiles will increase due to less going out."

The most direct manifestation of the demand backlash in overseas markets, especially in the United States, is the increase in orders in the Christmas season. For textile enterprises, especially home textile enterprises, every August began to receive Christmas season orders, mostly some products with festival elements. "The consumer rebound that began in the second half of 2020 has led many U.S. customers to make a judgment that the economic situation is improving, which directly leads to more orders for Christmas products than in previous years." The person in charge of the said textile enterprises said.

"According to current statistics, Christmas orders from the United States have increased by about 20%, especially kitchen towel orders." Yu conghai said. However, the growth of export orders caused by the return of orders and the rebound of overseas demand has brought bitter results. "Everyone is busy, but in the end, they don't make money", which seems to be a common phenomenon in textile enterprises.

Profit "eaten up"

Home textile enterprise orders to three months after the situation "rare history", and a freight forwarding company responsible person to the reporter sighed, "do more than ten years of freight forwarding, never encountered the situation now." He was referring to the scramble for containers and rising shipping charges.

"In October 2020, the price of a 40 foot high container to Europe will remain stable at about $3000, and even lower it can reach more than $2000. Since then, the price has been rising all the way, reaching 4700 dollars by November, and 7500 to 7700 dollars by the end of December." The person in charge of the freight forwarding company told reporters.

A person in charge of the Logistics Department of a home textile enterprise recalled that the shipping costs to the United States began to rise slowly from September 2020, which is probably when the number of return orders increased. "Previously, it was more than 2000 dollars per cabinet in the United States, but now it has risen to more than 6000 dollars, and it will continue to rise."

On December 31, 2020, the composite index of China's export container freight (CCFI) released by Shanghai Shipping Exchange broke through 1600 points for the first time, reaching 1658.58 points, a record high in history. The record of CCFI has been constantly updated in 2020.

Behind the rise in shipping costs is the tight supply of containers. "In the past, even though the price was raised, it was still possible to find containers, but it was very difficult to even grab containers from the end of November 2020. Even though the shipping space was reserved very early, it was found that there was no container when the container was loaded, resulting in the backlog of goods in the warehouse." Said the person in charge of the freight forwarding company.

"Just like air tickets, even if you have money, you don't have to buy tickets. Shipping space is the same thing, and even if you have shipping space, you don't have to have container loading." The person in charge of the Logistics Department of the above-mentioned home textile enterprises said that in the past, only a week in advance was needed to book the shipping space, but now it needs to be at least half a month in advance, and it is not necessarily possible to book. "Due to the failure to ship goods in time, the value of goods affected by the enterprise has reached 35 million US dollars."

The current situation of "one container is difficult to find" is considered to be the result of multiple factors. According to the analysis of the personnel of the freight forwarding company mentioned above, the slow turnover of containers is one of the reasons. "After the containers go out, they can't come back. The goods are transported to Europe and the United States, and they are under the pressure of the port warehouse. In the past, the goods could be picked up in three days and distributed to various channels. Now, it may not be finished in seven days. In addition, with the corresponding reduction of exports in European and American countries, shipping companies can't bring back empty containers, which leads to the decline of container turnover rate."

The port of Los Angeles has experienced its busiest month in 114 years in October 2020, handling more than 980000 TEUs.

However, the freight forwarder believes that the most important reason is that the transport capacity has not returned to the pre epidemic level, and exports have rebounded to a better level than normal. "In many routes, it was clear that there were three ships running. Now there is only one ship left, or there were three big ships, and now there is only one boat. It can't all depend on the shipping company. In April, may and June of last year, there was no cargo to ship and the ship was running empty. Now only so many shipping spaces are provided. The supply is less than the demand. It is reasonable to stand in the perspective of the shipping company. "

But when it comes to the impact of shipping price hikes on textile exports, Yan Liangmin said frankly, "it's too terrible to eat our profits directly."

"Textiles take up a lot of space. The value of a container, or the added value, is not high. For example, the value of a container's machinery and equipment may be several hundred thousand dollars, while the value of a container's textiles is more than thirty or forty thousand dollars." The person in charge of the Logistics Department of the said home textile enterprises.

"Most of our orders are FOB (customers bear the freight) mode, but one customer in Europe adopts the CIF (export enterprises bear the freight) mode. A container used to be more than 3000 euro, but now it is more than 7000 euro. The freight accounts for 22% of the value of the goods, which is too terrible and has already suffered serious losses." The person in charge of the above-mentioned home textile enterprises told reporters that the home textile industry was originally a small profit, with a gross profit of 10% to 15% and a net profit of only 3% to 5% in normal years. "Even FOB mode is very difficult for customers. It is very difficult to pass on the growth cost to consumers, because retail prices are not willing to increase too much."

Retail prices are difficult to rise. Similarly, the rise in the ex factory prices of enterprises is also limited. Even so, according to Wang Qijun, the price of products has been increased by 2% to 6%, most of which are two or three points. "Especially in recent months, the rise in the exchange rate will have an obvious impact on profits if there is no price increase."

For Vosges group, which adopts FOB mode in most cases, the factor of "eating" profit is more from RMB appreciation.

"The thin profit margin in the second half of 2020 is mainly due to the exchange rate. The rise in the exchange rate will directly" eat up "our profits of seven or eight points. In the second half of 2020, we will lose about 50 million yuan due to the rise of exchange rate." The person in charge of the aforementioned home textile enterprises also sighed, "the currencies of our competitors are devaluing. For example, Turkey is a competitor of high-end products, and the exchange rate against the US dollar has depreciated from more than 3 points to 7.8 in the past three years."

After breaking through the 7 mark in mid-2020, the RMB / USD exchange rate has now risen to close to 6.5.

"The profits are basically swallowed up by the rising shipping costs and the appreciation of the RMB. In addition, the cotton price has increased by about 20% from the lowest point in March and April 2020. We are working hard, especially in the two months at the end of the year. Most of our orders come from big customers and old customers. In the case of an epidemic, it's good to have orders. We also need to keep the enterprise running and feed the workers, which is also to maintain long-term customer relations. " The person in charge of the enterprise said that the period of receiving orders in the industry is about two months, and the enterprises did not know the trend of exchange rate when receiving orders.

"The whole fourth quarter was basically in a low profit or loss state, and even the more exports, the more losses."

Issued in issue 980 of China News Weekly on January 11, 2021