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Insight | Time: Mar 16 2023 10:41AM  Editor:Tina Kong
Hot local demand may start weakening from April
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The domestic textile market has been good after the Lunar New Year鈥檚 holiday and export has been slack. Subdued export is in line with market expectation while domestic sales are better than earlier anticipation.


CCFGroup has an on-site investigations about downstream market and the major results are as following:

Behind the prosperity of domestic sales is the run effect caused by surging domestic demand in short run. First, at the end of last year, many textiles companies and printing and dyeing plants were forced to put Spring Festival holiday one month earlier. Some orders for spring and summer which were supposed to produce before the Spring Festival holiday were postponed after the holiday. Secondly, fabric merchants replenished few fabrics before the Spring Festival but intensively restocked after holiday when their confidence recovered amid rapidly fading pandemic. Thirdly, demand for home textiles soared when the decorative demand improved in hotels and homes and wedding celebration grew. That means 3-5 months of demand is intensively released within 2 months after the Lunar New Year. Short-term hiking demand leads to hot market atmosphere.

Sluggish export is mainly caused by the decline in the growth rate of consumption in Europe and the United States and the reduction in orders taken during the destocking cycle. It is reported that orders in Europe and the United States are expected to decline by at least 20-30% year-on-year.

The performance of different downstream production bases differed but most faced good domestic orders and mediocre export orders.

Operation status of downstream market
Factory Performance
Water-jet fabric mills and printing and dyeing plants in Changxing Very busy after the Spring Festival holiday, basically run at full capacity, focusing on producing fabrics for home textiles. Good domestic orders but bleak export orders.
Water-jet fabric mills and printing and dyeing plants in Wujiang Very busy after the Spring Festival holiday too, with run rate above 90%,mainly producing fabrics for apparels. Domestic orders are very good after traders intensively restock but the export orders are diversified. Export orders to Europe and US decline apparently while those to the Middle East and South America are good.
Warp knitting plants and printing dyeing plants in Haining Very bad business after holiday, with run rate only at 60-70%, mainly producing velvet fabrics for autumn and winter. Some traders鈥 stocks of velvet fabrics for autumn and winter which were not consumed last year are high. Therefore, most show low buying interest after Spring Festival holiday. Export orders obviously decrease.
Circular knitting plants in Shaoxing Bad business of velvet fabrics for autumn and winter, but busy business of fabric for spring and summer. The operating rate of dyeing plants sustains high but plants are not as busy as those in Shengze, Wujiang.


Market forecast

Most domestic orders can guarantee production until end-Mar/early-Apr in fabric mills and printing and dyeing plants, but new orders have shown signals to weaken. Fabric traders have reduced restocking. The placement of domestic orders become more cautious when there is risk event overseas and capital market plunges.


According to the survey made by CCFGroup, the domestic orders may be clear to soften from Apr and export orders are likely to be hard to recover much. Under such circumstance, the textile demand is expected to encounter bigger downward pressure.


As for the operating rate, DTY plants face losses and run at high capacity now but the run rate is estimated to face slightly downside pressure later. Fabric mills and printing and dyeing plants have orders at hand now and most will keep running at high capacity before end-Mar but the run rate may reduce in Apr after earlier orders being delivered and new orders decreased. Polyester plants do not have high inventory burden temporarily. The polyester polymerization rate is likely to descend in late-Apr or May, with later reduction than downstream market.

[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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