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Insight | Time: Dec 9 2019 3:43PM
Changzhou Hutang Textile City review after the site visit
 
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There are some situations of Changzhou Hutang Textile City in Jiangsu recently. Hutang Town is a national yarn-dyed town, with textile output value accounting for about 60%. The textiles are mainly yarn-dyed fabric, denim fabric and corduroy fabric, and some knitted fabric and grey fabric. Hutang Textile City is dominated by yarn spinning mills throughout the country. In recent years, the scale of textile mills has shrunk significantly. Most of them have been replaced by mills which produced hardware, building materials, leather and paint, while others are mostly sluggish or even closed. At present, JMFC32S and JMFC40S enjoyed tolerable sales, but the volume and price were not as good as that in Oct. Other products were relatively weak, and overall price was generally stable. So what is the specific situation currently reflected as the nationally representative textile market?

1. Overall orders are not large, and weavers may not replenish stocks in end-2019.
Amid weak market conditions, weaving mills are cautious this year. Precisely, weaving mills are deliberately controlling output due to insufficient orders in current market. However, considering the recruitment problem in the next year, most of weaving mills have not completely stopped production but continued to run at a loss. Operating rate of weavers in Changzhou now remains around 60%. Due to limited sales and the concentration of air-jet looms in local weaving mills, there is overcapacity and inventory is still accumulating. Therefore, due to a series of factors such as inventory, capital burden and scarce orders in the coming year, weavers showed weak willingness to stock up in end-2019, and some even consider not stocking.

2. Large capital burden, start to withdraw capitals
At present, most of weavers and traders are busy withdrawing capitals. Burden on payment is more severe than that in last year, especially since Nov, weavers would rather give discounts for cash transactions. However, due to slack industrial chain this year and large capital burden, the situation of arrears is inevitable. Therefore, some traders joked that " it's unexpected that we can get accounts receipt."

3. Some fabric mills plan to have a holiday in advance
In the case of weak demand, large inventory burden, and more losses, weaving mills suffered a lot. Although there were news of holidays in early-Dec, the impending Spring Festival was too early. Taking into account the issue of employment, the machines must be guaranteed to run. According to the survey, due to slack market and the confusion towards the market over the next year, some weaving mills and textile companies planned to take a holiday in advance and will have holidays after New Year's Day, seven to ten days earlier than that in past years.

In conclusion, compact siro-spun carded 32S and 40S in Changzhou witness tolerable sales, but the market trading sentiment is weak. Overall inventory burden of textile companies is not high, and the inventory of weaving mills is at a high level. Profits are severely compressed. In addition, weavers are basically busy with recovering accounts, and some of them have plans for a holiday in advance. For market outlook, cotton grey fabric price may weaken before the Spring Festival, and downstream demand is hard to improve. Therefore, bearish sentiment still spread on the market. Weavers are suggested to control operational risks and recoup funds in end-2019.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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