As the Lunar New Year approaches, the once busy weaving factories have become deserted as the workers have gone home to celebrate the New Year. But the cloth bosses are still busy, checking accounts and collecting receivables, while making plans for the factory’s production in the new year. The most important thing is stocking up. What I have been asked the most recently is whether I should stock up on raw materials this year, and will prices rise after the holidays?
The author will briefly share his personal thoughts below:
Hoarding means purchasing in advance based on the prediction that product prices will rise in the market outlook or supply will be tight. So the core judgment is whether the price will rise later!
First of all, judging from historical experience, polyester raw materials will experience a small increase after the Spring Festival in most years, which is commonly known as “a good start”. However, this situation has changed in the past two years, and prices have also fallen after the holidays. Therefore, judging based on historical experience is still biased.
Secondly, look at the polyester raw material itself. The current inventory of polyester raw materials is at a low level for about a week, compared with nearly two weeks in the same period last year. Moreover, around the Spring Festival this year, there are still nearly 500,000 tons of equipment that need to be shut down for maintenance. From this point of view, the inventory pressure on polyester factories after the Spring Festival will not be too great. Therefore, when there is not much inventory pressure, the chances of polyester factories implementing a “good start” are still relatively high.
In addition, look at cost and demand. At present, crude oil, PX, and PTA are still relatively strong in the short term, and their cost side is still strengthening. Moreover, with the depreciation of the renminbi, the international competitiveness of China’s textile and apparel will be improved, which will boost exports. Therefore, the market’s expectations for spring and summer fabrics are positive. Therefore, in the short term, costs and demand will also support the price of polyester products.
But we must also see that the market trend at the end of 2016 was a wave of continuous rising prices. It was driven by the continuous purchasing of weaving factories. As a result, the inventory of many polyester manufacturers was once at zero inventory. In fact, these inventories were transferred to downstream weaving factories, so many weaving factories actually already have a certain amount of inventory.
And in recent years, we have seen that the fabric market is no longer a “one-size-fits-all” market. Weaving companies can survive in the market by producing only a few products a year. This is no longer possible, because with the substantial expansion of production capacity, it is difficult for a certain product to sell well for a long time, especially some relatively conventional products, which can only sell well for a month at most. Therefore, this means that the current weaving factory can only operate in multiple varieties. In the past, it only produced 5 products, but now it has to produce more than 20 products in order to adapt to market changes and reduce operating risks. This also caused the boss of Zaibu to be troubled when stocking up. He didn’t know what products to stock and how much to stock? In order to reduce risks, most cloth owners will choose some conventional varieties when stocking up on raw materials. Therefore, the current inventory of conventional varieties in polyester factories is relatively low.
Based on the above, the author believes that there will be a slight increase in raw materials after the holiday, so it is recommended that downstream weaving companies make some stockings before the Spring Festival to avoid missing out on the market.
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