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Insight | Time: Apr 12 2021 2:16PM
EU and US still replenishing China' s textile and apparel
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Since Q3 2020, China's textile and apparel trade has shown a recovery growth and a steady recovery. In Q4, with severe pandemic outside China, many mills shut down. At the same time, due to the period of replenishment in overseas market, Wal-Mart replenished stocks largely, and many overseas orders flew back to China. The epidemic outside China spread, which has created a great bonus period for China local cotton textile industry to some extent. Combined with many favorable factors such as the domestic e-commerce Festival, the cotton textile industry started bull market at the end of November, which lasted for several months. Both production and marketing of mills throve, and they were fully engaged.

However, in mid-March 2021, the market gradually weakened, and fresh orders of mills greatly reduced. So, is the cycle of overseas consumption improvement and inventory replenishment over? Do overseas orders have continuity?銆

According to the data, US, EU, ASEAN and Japan were the main export markets of China's textile and apparel in 2020. US and EU accounted for nearly 40%. US and EU new cases and deaths decreased sharply but it was noteworthy that new confirmed cases in Britain, France and Germany slightly increased. One needs to be alert to shifts in the epidemic dynamic.

From the data of YoY growth rate of social inventory in the United States, growth rate of wholesale and retail industry inventory began to narrow from mid-2020, but the growth rate of retail industry did not return to the positive and it may rise. After the 2008 financial crisis, US replenished textile and apparel from various channels.

From the inventory of US textile and apparel industry, retail side was in the stage of inventory stabilization and recovery, while the production and wholesale sides still seemed not to get rid of destocking. From US industrial economic structure, because the textile and apparel industry was a labor-intensive industry, under global division of labor, US only retained the brand and design, and the textile and apparel were mainly imported. It was reasonable that the inventory of production links was still falling as the epidemic affected resumption. In the wholesale sector, passive destocking was related to the US fiscal stimulus policy and consumption recovery.

Whether in production, wholesale or retail sides, the inventory was still far away from that before the outbreak of the epidemic in 2019, and there is still much room for replenishment.

In the retail end, the inventory reached a turning point in the fourth quarter of 2020. However, as it was the traditional peak consumption season in November and December in EU and US (black five, Christmas and other festivals), the growth rate of inventory declines.

As of January, there is still 9% room for replenishment from the average retail inventory in 2019.

According to the import data of US customs, since the fourth quarter, the import volume of US textile and apparel has increased significantly year-on-year, but the import value did not. From a business perspective, it was caused by the price reduction for more orders in the first three quarters (the exports in the fourth quarter had the difference of ordering time) and the relatively low-priced feedstock. Unit price of apparel decreased significantly.

Severe prevention and control of EU epidemic and optimistic China textile and apparel trade

The UK, France, Germany and Italy are the four major economies in EU and the traditional textile power in Europe. According to OECD business trend data, we can get a general understanding of the overall social inventory.

Since September and October, the retail inventory of four major European economies, France, Germany and Italy, has marked a turning point and begun to recover.

From the EU's import data, since September, the EU's textile and apparel imports have increased in rehabilitation, while the volume and value of textile and apparel from China have risen significantly, even more than 20% in December. In the fourth quarter, EU's total textile and apparel imports climbed up by 12.4%, while those from China moved up by 15.1%.

Epidemic prevention and control in Europe was still severe. Many countries have extended the lockdown time. Germany has recently postponed lockdown to April 18. As early as March 15, most parts of Italy have implemented the "lockdown" measures again.

The reversal of epidemic situation in Europe will slow down the recovery of economy and limit the purchasing power of society. However, to a certain extent, it also means that there is demand for China's textile and apparel. Every coin has two sides. China textile and apparel trade is still optimistic.

To sum up, China's textile and apparel trade is full of imagination. However, it is worth noting that US wielded the stick on the issue of Xinjiang cotton, as well as EU and other countries. Pay attention to what will happen in the future.

[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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