Sometimes numbers can make a crisis more real and cruel. On the 11th, the WTO Secretariat stated in a report that a global economic simulation model predicts that global trade growth in 2022 is expected to drop from 4.7% in October last year. to 2.4%-3%. The impact on the textile market is evident!
“The current decline in gray fabrics far exceeds the decline in raw material costs, resulting in a lack of profit margins and entering a point where “one meter of production is lost”. ——The owner of a gray cloth production factory in Jiangsu
“Shandong has been severely affected by the epidemic. There are many closed areas under control, and workers cannot get out. We have more than 1,000 employees in the factory, and the work schedule is very chaotic. It is very troublesome to calculate salary performance.” ——The owner of a differentiated textile factory in Shandong
“If you can’t ship by sea, foreigners can’t receive the goods, so they place orders elsewhere. The less they receive the goods, the more they panic and the more they place orders. In fact, a large part of it is false demand. Once the goods are received, the panicked false demand part instantly Disappear. The higher we are praised, the more miserable we may fall.” – Boss of a foreign trade textile company with 100,000 spindles in Ningbo
Nowadays, the epidemic situation is recurring and the external situation is turbulent. There are three major hurdles facing textile companies. If they are not careful, these three difficulties may prevent them from surviving this cold winter.
The first difficulty: rising costs and compressed profits
According to feedback from some small and medium-sized textile companies in Hebei, Henan, Shandong and other places, there are relatively few new orders received after the Spring Festival. Rising domestic shipping costs and wide fluctuations in the RMB exchange rate have made it more difficult for textile and clothing companies and foreign trade companies to receive orders. Profits have been greatly compressed, and some orders have even suffered losses of more than 1,000 yuan/ton. Cotton yarn and gray fabric inventories are also increasing, which has left many companies breathless.
A medium-sized textile factory in Handan, Hebei said that one of the factors leading to the company’s expectation of short-term production reduction or even suspension of production is the large-scale spread of the domestic epidemic, the continuous escalation of prevention and control, and the shutdown of logistics in some areas, which has made the operations of textile companies even worse. Not only are the access to and from some cotton warehouses in Shandong, Hebei, Jiangsu and other places restricted, but cotton yarn shipments are also not smooth, and freight rates are rising. Second, the wide fluctuations in the RMB exchange rate have made it more difficult for textile and garment enterprises and foreign trade companies to receive orders. Multiple uncertainties such as the situation in Russia and Ukraine, the domestic epidemic, and the Federal Reserve’s interest rate hikes have made market transactions more cautious. The exchange rate of the RMB against the US dollar has continued to decline for two weeks, giving up almost all the gains since the beginning of the year.
The second difficulty: falling into the order trap
The topic of false demand is like a ghost existing in the hearts of foreign trade textile companies. If you look at Weibo, you will find that many similar voices of concern have appeared. This is the so-called order trap among foreign trade people. It is actually an industrial anomaly caused by changes in very special external factors. If the brakes cannot be applied in time, it will almost become inevitable for the enterprise’s capital chain to break.
The third difficulty: chaotic labor scheduling
The outbreak of the epidemic caused a large number of orders to be put on hold or even cancelled. Workers were in place but had no orders to fill. Subsequently, the operating rate dropped sharply, and many companies began to limit production or even have holidays and layoffs. Both ends of the supply chain have been impacted successively, which has had a huge impact on the entire textile industry.
The epidemic has disrupted the rhythm of the textile industry, leading to a decline in the performance of the entire industry in the first quarter. There may not even be a so-called peak production and sales season in the second quarter. Textile bosses are already on pins and needles, and we also ask textile experts to do a good job in epidemic prevention. While controlling, we should objectively evaluate the current status of our business operations with a bottom-line thinking model, protect the company’s capital flow, logistics and customer stickiness, and at the same time prepare strategies to deal with corporate operational risks caused by the outbreak of systemic risks, in the midst of changes Continuously look for the company’s strategic positioning within the industry.
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