Affected by factors such as the sharp drop in cotton price and weak demand, the current textile industry is generally depressed. Farmers, cotton processing enterprises, textile enterprises and the whole industry are collectively complaining. Cotton processing enterprises have stopped or semi-stopped production. Textile enterprises are experiencing slow sales. Farmers are giving up cotton farming and turning to grain farming. Industry insiders believe that farmers' shift in production has laid a hidden clue for a new cycle. The current difficulties encountered by the entire industrial chain of cotton processing and textile enterprises will trigger a new round of industry reshuffle. Some small and medium-sized enterprises will be forced to exit the market.
The sharp drop in cotton prices has led farmers to switch their production. Dezhou City in Shandong Province is located on the northwest plain of Shandong. It is a traditional large cotton-producing area and also one of the major textile bases in the country. The city has 247 cotton textile enterprises with an annual cotton requirement of about 450,000 tons. Currently, the seed cotton price here has dropped to around 7.8 yuan per kilogram, a year-on-year decrease of 44%.
Zhu Zhaicun Village in Laocheng Town, Wucheng County, Dezhou City, is home to Ma Yuzhen's family which planted 13 mu of cotton. This year, they harvested a total of 3,300 kilograms of seed cotton. When the reporter visited her house recently, he saw rooms and corridors piled high with cotton. She told the reporter: "The price is not high, I don't even have the mood to tidy it up. Now, good quality seed cotton can be sold at 8 yuan per kilogram, while poor quality ones can only be sold at 7 yuan per kilogram. This year was all in vain!"
According to the monitoring of the Dezhou Cotton Association, the current acquisition price of fourth-grade seed cotton in Dezhou is about 7.8 yuan per kilogram, a year-on-year decrease of over 40%. Last year at the same time, the acquisition price of fourth-grade seed cotton reached a peak of 14.4 yuan per kilogram.
Wang Xijun, president of Shandong Lijin County Xijun Crop Planting Professional Cooperative and a member of the China Cotton Association, told the reporter that this year, the low cotton price has left little profit margin for cotton farmers, and many of them have already abandoned cotton farming and turned to grain farming.
Ma Yuzhen said: "Cotton farming is time-consuming and labor-intensive. Compared with grain farming, cotton farming reduces the working time by at least three to four months. If we calculate the income from working outside at 70-80 yuan per day, there would be a difference of 7,000-8,000 yuan between cotton farming and grain farming."
It is understood that Dezhou is a major cotton-growing city, with a long-term cotton planting area of 2 million to 3 million mu. In recent years, the area has significantly decreased, and farmers have given up cotton farming and turned to grain farming. In 2008, the cotton planting area in Dezhou City was 2.9 million mu, in 2009 it was 2.31 million mu, and in 2010 it dropped to 1.55 million mu. In 2011, due to higher cotton prices in the previous year, the area increased to 1.6 million mu, but only increased by 3% compared to the previous year. This year, many farmers have already pulled out the cotton plants early and planted wheat. According to the calculation of the Dezhou Cotton Association, the cotton planting area in the city next year will decrease by 20%-30%.
Cotton enterprises are collectively "gritting their teeth to persevere". Kangqiao Cotton Industry Co., Ltd. in Wucheng County is a relatively large cotton processing enterprise locally. When the reporter visited here recently, he saw that the factory area was quiet. Four or five people were lazily picking "three fibers" (chemical fibers, silk, hemp, hair, plastic ropes, cloth pieces, etc. mixed in cotton) from the cotton pile.
Sun Ronggui, the general manager of the company, told the reporter that since last month, the production has been abnormal. They only produce when old customers need it. He said that the enterprise is now "troubled on both ends", one end being the difficulty in collecting seed cotton as farmers are reluctant to sell, and the other end being the low price of lint cotton making it hard to sell. The company basically broke even last month, but it is estimated to lose 30,000-40,000 yuan this month.
Longxiang Cotton Industry Co., Ltd., which is adjacent to Kangqiao Company, is in a similarly bad situation. When the reporter visited the production workshop of this enterprise, he saw a worker dozing off against the machine. The person in charge of the company, Lyu Baofeng, told the reporter that the company is currently operating at half capacity, mainly to retain workers and maintain some old customers.
Sun Ronggui and Lyu Baofeng recalled that the cotton market from last year to this year could be described as having had great fluctuations. Last September, when new cotton came to the market, Sun Ronggui sold the first batch of lint cotton at a price of 12,300 yuan per ton, after which the price quickly rose to 32,800 yuan per ton by mid-November. "After that, the good times were over, and the price has been declining ever since, and it has now fallen to around 19,000 yuan per ton," he said.
As lint cotton processing enterprises are in trouble, the downstream spinning industry is also suffering greatly. Wan Yongming, the person in charge of Huili Cotton Industry in Handan City, Hebei Province, told the reporter that the enterprise has 18,000 spindles, but currently only 6,000 spindles are in operation. The product is sold at 28,000 yuan per ton, while the cost price is above 29,000 yuan per ton. "Even if we are losing money, we cannot completely stop, otherwise we won't be able to keep the workers and old customers," he said.
Huayi Group in Wucheng County is an enterprise mainly producing fine-spun cotton yarn. The group's chairman, Meng Qingshun, told the reporter that according to the current market price, the enterprise loses 1,500 yuan for every ton of cotton yarn produced. "Currently, due to the relatively sluggish actual demand downstream, the inventory of the spinning mill continues to accumulate, and we can only persevere through the difficulties," he said.
Ma Junjie, deputy secretary-general of the Dezhou Cotton Association, introduced that since early March this year, with the sharp decline in cotton prices, the price of cotton yarn has also significantly dropped, making it very difficult for textile enterprises to operate. From May to July, among the local small and medium-sized cotton textile enterprises, about 80% either stopped or limited production, with the level of difficulty comparable to the impact caused by the financial crisis in 2008. Since the end of August, with the stabilization and rise of cotton prices, the sale of cotton yarn has improved somewhat, and the suspended enterprises have gradually resumed production. Since mid-September, the spot price of cotton has continued to fall, affecting the downstream market. Fabric and garment customers have weak purchasing intentions, leading to hindered cotton yarn sales. The average operating rate of cotton yarn enterprises is only about 70%, and business operations have once again fallen into difficulty.
Key to overcoming the difficulties in the industrial chain is structural adjustment. Ma Junjie said that due to the weak foundation of cotton production and the significant increase in production costs, the price fluctuations have caused the entire industrial chain to encounter difficulties, and the impact on farmers is the greatest. This has seriously affected the enthusiasm of farmers to grow cotton, and the planting area in some cotton-producing areas has continued to decline. There may be another wave of cotton price hikes next year.
For processing enterprises, the biggest problem is the sluggish downstream actual demand and the unfavorable export environment. Sun Ronggui said: "The biggest problem now is that we can't see any hope. I receive a lot of industry information on my mobile phone every day, but everyone is expressing pessimistic views."
Meng Qingshun said that domestic textile enterprises have occupied the market and developed rapidly for many years relying on lower material costs and labor costs. However, in recent years, the rapid rise in domestic labor costs, the increase in the cost of domestic cotton textiles, and the decline in international competitiveness have led to a serious loss of foreign trade orders. This can be seen from the recently concluded 110th Canton Fair.
According to reports, the transaction data of the 110th Canton Fair is not optimistic. Orders from Europe and America are insufficient, with a reduction of 20% to 30%, and short-term orders within six months account for more than 80% of the total orders, lacking long-term orders.
Industry insiders analyzed that although the national temporary reserve policy has stabilized cotton prices, a new round of reshuffling in the cotton textile industry is inevitable. China's labor costs are still on a continuous upward trend, and domestic cotton prices have been higher than international cotton prices for a long time. The tight capital situation will continue, and these unfavorable factors for the cotton textile industry are difficult to fundamentally change. Therefore, the cotton textile industry will experience a new round of major reshuffling, and a batch of enterprises with insufficient funds and technical strength will be forced to exit the market.
Ma Junjie believes that for processing enterprises, structural adjustment is the key. Only by increasing product added value, eliminating low-quality products, and phasing out backward production capacities can cotton textile enterprises find their way forward. The textile industry must carry out technological transformation, transforming products from low-grade and extensive types to high-grade and refined types, and actively developing high-value-added non-cotton fibers to reduce the use of cotton and decrease dependence on cotton.