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Insight | Time: Dec 2 2022 2:04PM  Editor:Leslie
Conflict between weak home textile market and eager sellers
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As 2022 draws to a close, most grey fabric factories have already felt the plain trading sentiment on the market as sales continue to be weak. The trading situation of home textile fabric factories in Nantong is significantly inferior to last year, which has continued since the beginning of the year. And trades of grey fabrics used in home textiles are apparently weaker than those used in apparel manufacturing. Such situation is reflected in the following aspects.


First, weak prices. The current  textile market has entered the traditional off-season, with low producing proportion of apparel fabric orders in the factory and the amounting inventory. The price of grey fabric kept falling in 2022. Took C32S*C32S 130*72 63" twill as an example, its price fell by 1.5-2yuan/meter from the highest point at the beginning of the year. Home textile fabric orders were sparse this year, and the prices also saw a decrease, which was greater than clothing fabric. Let's look at C40S*C40S 133*72 105" as an example, its price dropped by 3-3.5yuan/meter from the highest point at the start of the year. As mills expect continued decline in cotton prices and sluggish demand in the coming year, the traded price of home textile fabric is supposed to lose further ground.

Second, less orders. After the Spring Festival, the orders of home textile grey fabric factories continued to be insufficient, only those of C40S and C60S were maintained. At the end of October, affected by the epidemic, trades of home textile fabrics plummeted. At the same time, terminal brand customers expected the y-o-y growth of orders to decrease by 30%-40%.

Third, other aspects. With operating rate of yarn mills, the inventory of textile mills was high due to the decrease in orders and spot sales this year, as well as the continuous depreciation of the inventory given the decline in raw material prices. As a result, the value of new orders was mostly maintained near the cost line, and weaving mills were not active in producing. After the lockdown in Nantong, Jiangsu Province was lifted in November, mills only operated during the nighttime, and didn't run at full capacity, which caused a slump in operating rate. At the same time, some weaving mills scheduled to close early in mid-December.

What are the reasons behind the underwhelmed home textile fabric market?

First of all, the production capacity of Nantong-based home textile weavers increased in 2021. According to statistics, in 2021, a total of 5,000-6,000 air-jet looms were increased in Nantong, and the annual output of grey fabric rose by about 250-300 million meters. Therefore, when demand shrinks in 2022, there is a serious overcapacity, making the competition fiercer among weaving mills and price stampedes abound.

Secondly, the demand for home textile grey fabrics decreased to varying degrees in 2022, both at home and abroad. With domestic sales, from January to October 2022, the total retail sales of social consumer goods in China reached 36.06 trillion yuan, a slight increase of 0.6% year-on-year, of which the consumption of clothing, shoes and hats, and knitted textiles totaled 115.5 billion yuan, down 4.4% year-on-year. As for exports, from January to September, China's export of home textile products reached 35.082 billion US dollars, up 0.99% from a year earlier, while the growth rate declined gently. Among them, China's home textile exports to the United States and the EU market were 7.987 billion US dollars and 4.616 billion US dollars, down 11.12% and 7.6% year-on-year respectively. It can be seen that both the domestic and export markets of home textiles lack vitality, thus it is difficult to boost the demand for home textiles.

Finally, the continued decline in cotton prices is also one of the key factors. From January to April, cotton prices remained around 22,000yuan/ton, with little fluctuation. While cotton prices dropped in May due to cotton sell-offs caused by increased loan repayment pressure of ginning factory. In June, the sharp interest rate hike in the United States triggered the worry of a global recession, and macro factors led to a plunge in cotton prices. By November, mills generally believed that cotton prices would move down further in 2023.

To sum up, the overall situation of the home textile grey fabric market in 2022 is not satisfactory, mainly reflected in less orders, too many spot stocks, and weak prices. Oversupply and falling raw material prices are the major causes of the underperforming home textile fabric market. Therefore, it is expected that sales of home textile grey fabrics will remain weak in the short term, and weaving mills may shut down gradually since mid-December.

[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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