Market Dynamics: Orders Fall Sharply In July

"Now the orders have decreased a lot. All orders in July and August have been shipped, but the customers have not added any more orders. The peak is in March and April, when orders are the most On August 13, Mr. Lu, who is engaged in garment production in Shantou, Guangdong Province, told time finance and economics that the booming clothing export in the first half of the year seemed to have "stalled".

According to the data of China Textile Import and Export Chamber of Commerce, from January to June 2021, the cumulative export of textile and clothing reached 140.86 billion US dollars, with a year-on-year increase of 11.9%. According to the incomplete statistics of time finance and economics, recently, about 43 listed companies in the textile and garment industry have issued performance or performance forecast in the first half of the year, and 38 companies have achieved growth in performance forecast, rise in the same direction or turn losses into profits.

Among them, the net profit of Shenzhen textile a (000045) is expected to be 63 million to 90 million yuan in half a year, with a year-on-year increase of 8650% to 12400%; Xinfengming (603225) expects to realize the net profit of RMB 1.30-1.35 billion in the first half of 2021, with a year-on-year increase of 549% - 574%; Blum Oriental (601339) realized a net profit of 550 million yuan, a year-on-year increase of 304%

"The return of global orders due to epidemic factors began last year and has continued in China this year." On August 13, Jiansheng group (603558), an export enterprise of knitted sportswear, released its semi annual performance report. The net profit of Jiansheng group in the first half of the year was 108 million yuan, up 96.4% year on year. As for the reasons for the big increase in performance, the semi annual report mentioned that it benefited from "order backflow".

At the moment, the situation is changing.

According to the data released recently by the General Administration of customs, the export of clothing and textiles fell in July. According to RMB settlement, the export of textile and clothing was 181.39 billion yuan, a year-on-year decrease of 18.24%, a month on month increase of 1.82%, and a decrease of 4.21% over the same period in 2019; Among them, the textile export was RMB 75.06 billion, a year-on-year decrease of 33.73%, a month on month decrease of 6.90%, and an increase of 1.30% over the same period in 2019; Clothing export was 106.33 billion yuan, down 2.08%, up 9.03% month on month and 7.76% lower than the same period in 2019.

In fact, since the second quarter, the monthly growth rate of textile and clothing exports has gradually declined. In May, the export dropped by 16.8%. In June, the export continued to decline, but the decline rate was significantly narrowed than that in May, only 3.7%.

"The larger decline in textiles and clothing is also due to the resumption of textile export orders in some Southeast Asian and South Asian countries, especially India and Bangladesh. It turns out that some of the orders returned to China have gone back. " On August 13, Bai Ming, deputy director of the Market Research Institute of the Ministry of Commerce, pointed out in an interview with time finance and economics.

Lu, who is engaged in garment production, agrees, "in the first half of this year, if the epidemic situation in other Southeast Asian countries is alleviated, domestic orders will decrease, and then the prices of raw materials will fall."

"Backflow" orders slow down obviously

Although the first half of the textile and clothing listed enterprises reported good results, but according to the RMB settlement, the total textile export volume in the first half of the year is not as good as that in 2020. According to the data of the General Administration of customs, from January to July, textile and clothing exports totaled 1090.21 billion yuan, a year-on-year decrease of - 0.93%; Among them, textile export was 519.89 billion yuan, down 17.94%, and clothing export was 570.32 billion yuan, an increase of 22.17%.

If calculated in US dollars, the situation of clothing exports is slightly better, but textile exports also showed a double-digit decline. From January to July, textile and clothing exports totaled 168.351 billion US dollars, an increase of 7.73%; Among them, the textile export was US $80.252 billion, down 10.80%; Clothing exports reached 88.098 billion US dollars, an increase of 32.89%.

"China's textile and clothing export market is concentrated in Europe, the United States and Japan. With the increase of vaccination rate and the normalization of group immunity in these countries, the import of textile epidemic prevention products decreased significantly, and some developing countries began to gradually resume production, resulting in backflow and transfer of orders. In addition, due to China's rapid resumption of work and production, the export base of relevant textiles was relatively large last year, so it is inevitable that the export of such products will decline year on year. " LAN Qingxin, researcher and doctoral supervisor of the National Institute of opening up at the University of international business and economic cooperation, analyzes the financial situation of the times.

Regarding the slow down trend of return orders in July and August, Bai Ming said that the epidemic situation in India was relatively serious in the first half of the year, and many orders were transferred to China in April and may. In the second half of the year, some industries in India and Bangladesh have also recovered. As a result, there has been a "backflow" loss of orders in July and August.

Lanqing further said that in addition to order backflow is an important reason for affecting export growth, rising costs, slow economic recovery and curbing demand are also major reasons.

For the textile export decline reflected by the data of the General Administration of customs, Mr. Lu is engaged in production in the front line, and his feeling is more intuitive. "In the first half of this year, we felt that when the epidemic situation in foreign countries eased slightly, foreign trade orders would decline," Mr. Lu said

When time finance asked Mr. Lu and the small and medium-sized business owners around him whether they were worried about no orders, Mr. Lu said frankly, "the price of raw materials in recent years is the highest in two years. It doesn't matter if you can't get the order, otherwise you will also lose money. After all, the clothing industry is a small profit industry. "

As for listed companies, there are also reports of a decrease in orders. On August 13, the reporter called xinfengming (603225) Investor Relations Department of a large modern joint-stock enterprise integrating polyester, polyester spinning, texturing and import and export trade. The staff said that the export situation in recent July had indeed declined, "the epidemic relationship will certainly have some impact."

When Shidai finance and economics asked whether it was affected by the rise in sea freight prices, xinfengming staff said, "there are also factors that may hinder the export of goods, but we will mainly sell more domestic products, and the proportion of exports will be smaller."

There are still many uncertain risks

Because of the outbreak, the search for alternative orders is not destined to last long.

Bai Ming pointed out that "in recent years, China's outward transfer of orders, but last year's situation is relatively special. Many Chinese factories are the first to resume production. In many countries, the epidemic situation is relatively serious, affecting their textile exports. Customers can't wait, so they come to China to buy textiles. Now that the production capacity of those countries is restored, customers are running back. "

Large domestic textile and garment enterprises are also aware of the temporary nature of order backflow. Jiansheng group pointed out in Section 3 "management discussion and analysis" of the semi annual report that "it is still the general trend to transfer medium and low-end production capacity to Southeast Asian countries with lower factor cost and less tariff dispute disturbance."

With the gradual normalization of global epidemic prevention and control, trade demand for epidemic related goods has weakened, and many manufacturing countries have resumed production. Li Xingqian, director of the Department of foreign trade of the Ministry of Commerce, said on July 22 that this is a challenge and an opportunity for China's foreign trade.

"On the one hand, China's exports will face intensified market competition; On the other hand, countries need a lot of raw materials and production equipment to resume production, and the demand for capital goods and intermediate products in China has increased significantly. "

As for the possible impact of the restart of production in many manufacturing countries, Li Xingqian said, "at present, we are closely following the changes of foreign trade situation. In the second half of the year, we will focus on the outstanding difficulties and problems faced by enterprises, study and issue more targeted policies and measures with relevant departments and local governments, so as to effectively reduce the comprehensive cost of foreign trade enterprises."

Textile industry is closely related to macroeconomic environment and relevant national policies. At present, the global epidemic alert brought by the delta mutant strain has not been lifted. One is called "ramda"（ λ)” As a result, the development of domestic textile industry is facing many uncertain risks.

LAN Qingxin suggested that in the second half of the year, export enterprises should further tap their potential, reduce costs from the perspective of increasing efficiency, diversify export markets, and actively expand overseas demand by more cross-border e-commerce means. At the same time, we should adjust the production capacity appropriately, and do not blindly expand production and increase inventory.

It is worth mentioning that, according to the data of China Textile Import and Export Chamber of Commerce, as of the end of July, the phenomenon of freight increase and port congestion has not been fully alleviated, becoming the biggest uncertain factor affecting exports in the second half of the year. The rising prices of raw materials in the upstream caused by global inflation did not transmit to the sales prices of downstream products. In the first half of the year, the total export prices of knitwear and woven garments decreased slightly by 0.8% year-on-year.

In addition, the scissors gap between CPI and PPI in China has been running at a high level for nearly half a year in a row. Under the double impact of high raw materials and weak consumption end, downstream clothing enterprises, especially small and medium-sized enterprises, may be in the situation of continuous compression of profits.