China's textile industry breaks through in 2018

In 2018, on the fortieth anniversary of China's reform and opening up, China's textile industry has made remarkable achievements in the past forty years. While it has become the key force to support the healthy and stable operation of the world textile industry system, China's textile industry is also facing new changes in raw material supply, trade rules, consumer market and investment environment.



This year, the focus of production capacity and consumer market has shifted to emerging countries, and the global industrial division of labor is being reshaped.



This year, industry enterprises began to change from providing products to providing experience, from manufacturing to service manufacturing, from providing equipment to providing overall solutions.



In this year, China's textile industry broke through
.


Overall situation review



Around the new era of socialism with Chinese characteristics, the main contradiction in our society has been transformed into the contradiction between the people's growing need for a better life and the unbalanced and inadequate development - rdquo. This transformation, in 2018, the textile raw material industry is also undergoing an industry reform. Throughout the year, China's textile raw material industry has been running smoothly and steadily, especially the chemical fiber industry, which can reflect the market operating environment of giving priority to efficiency and quality. With the continuous improvement of automation and intellectualization of technology and equipment in the whole industry, the development speed of product diversity is also accelerating, and the bottlenecks of raw materials in downstream spinning and weaving fields are constantly solved, thus laying a solid foundation for the development of downstream garment industry.



The annual performance of chemical fibre industry is < br />.


The chemical fibre industry continues to deepen the structural reform of supply side, mainly in the following three aspects:



1. The release of new capacity is accompanied by the elimination of backward capacity. In 2018, viscose fiber, polyester fiber, acrylic fiber, polypropylene fiber and other fibre industries have seen the elimination of old production capacity. Taking viscose filament industry as an example, according to the requirements of "Standard Conditions for Viscose Fiber Industry (2017 Edition)", although the overall production capacity of viscose filament industry is still 180,000 tons per year, after a series of capacity structure optimization, four major viscose filament industry bases have been formed, namely, Yibin in Sichuan, Jilin Province, Xinxiang in Henan Province and Nanjing in Jiangsu Province.



And viscose staple fibers, although in 2018 nearly 700,000 tons of new capacity was gradually released, but there are also nearly 300,000 to 400,000 tons of backward capacity eliminated. This kind of capacity elimination is not only because the backward capacity does not meet the standard conditions, but also because the new capacity not only shows the advantages of scale, but also the automation of equipment and technology can effectively improve the production efficiency. Therefore, from the cost point of view, enterprises need to take the initiative to withdraw the old equipment from the historical stage. Through this change in production capacity, the production line of viscose staple fibre with single line size less than 30,000 tons has basically disappeared. The fiber industries such as polyester, acrylic and polypropylene fibers also show that the market elimination mechanism takes precedence over the policy elimination mechanism.



2. Production bases are gradually gathering and developing, large-scale groups of sub-industries are increasing, and some enterprises in the industry are actively deploying overseas production bases. Taking viscose staple fiber industry as an example, this year has gradually formed a gathering place in Xinjiang, Hebei, Jiangxi, Jiangsu, Shandong, Zhejiang and other provinces. Among them, there are three enterprises with a scale of more than 700,000 tons. Xinjiang viscose staple fiber production capacity has reached nearly 1 million tons, accounting for 22% of the total viscose staple fiber industry capacity. Sino-Thai chemical production capacity has reached 930,000 tons, that is, Sino-Thai chemical occupies about 93% of Xinjiang viscose staple fiber production capacity.



In the polyester industry, large-scale polyester production groups were formed with Hengli, Hengyi, Tongkun, Rongsheng, Shenghong and other large groups as representatives. At the same time, Tongkun Group as a representative, through the introduction of automation production equipment, such as mechanical arm, automatic baler and other automation equipment, a large number of labor costs were saved, and the purpose of improving production efficiency was achieved, and automation was achieved. After reaching above 80%, the product quality balance has been greatly improved. In actively expanding overseas projects, Hengyi Industries (Brunei) Limited, a subsidiary of Hengyi Group, has further invested in petrochemical projects in Brunei, while Hengli Group is expected to conclude petroleum refining projects with the Abu Dhabi Government. Hengyi Group and Hengli Group are both private enterprises. The expansion of their overseas business shows that large groups in the domestic polyester industry have begun to actively expand their upstream refining projects in order to break through the whole industrial chain from crude oil to polyester and ensure the layout of their industrial safety.



ThreeEnvironmental protection policy is strict, enterprises invest more and more in environmental protection, and the cost of chemical fiber industry increases accordingly. Opened in the second quarter of 2018, & ldquo; Looking back at the national environmental protection, & rdquo; Action, although not too much impact on the chemical fiber industry itself, but the impact of the entire chemical fiber industry upstream and downstream, thereby affecting the entire chemical fiber industry. For example, the production enterprises of caustic soda, sulphuric acid and other chemical products for viscose staple fibers were shut down more than 40% at one time, which seriously affected the supply of auxiliary chemical raw materials in Shandong, Jiangsu and Zhejiang provinces, resulting in a sharp rise in the cost of viscose staple fibers factories in these three provinces; at the same time, coal-to-gas conversion also caused a sharp rise in the cost of viscose staple fibers factories in Shandong, Jiangsu and other provinces. The cost of viscose staple fiber factories in Sichuan Province, which have to be in the forefront, has risen faster. In the downstream water-jet weaving, printing and dyeing industries, printing and dyeing factories and water-jet weaving factories in Guangdong, Zhejiang, Jiangsu and other places have also been shut down for a time.



Because the upstream and downstream are affected by environmental protection policies, resulting in inadequate start-up rate of their respective links, and ultimately shows that the price of chemical fibers and shipment status in 2018 has been in a warm swallow state: the price of raw materials has led to a rise in the cost of chemical fibers, while the downstream production restriction has caused a blockage in the delivery channel of chemical fibers. In this state, although the price of chemical fibers rose sharply in the third quarter, it was hindered by the downstream shipping channels. After entering the fourth quarter, the commodity prices of the whole chemical fibers industry and cotton industry fell.



The annual performance of cotton textile industry is < br />.


Affected by the gradual escalation of Sino-US trade frictions since March of the first quarter, the confidence of cotton textile industry is not too strong. The reason is that after the emergence of new international trade patterns, the industry mistakenly believed that Sino-US trade frictions would be more severe than the financial crisis in 2008, so it had more concerns when taking orders. Under this mentality, the cotton textile industry has shown the following performance throughout the year:



1. Priority is given to exchange rate, finance and cargo safety. In 2018, the RMB exchange rate shows the trend of “ appreciation first and then depreciation ” contrary to that of “ in 2017, the path from depreciation to appreciation ” is exactly the opposite. Because the appreciation of RMB exchange rate will cause certain losses to export enterprises when they settle foreign exchange, foreign trade enterprises that have just suffered losses in this respect in 2017 are not afraid to take too many foreign orders in the appreciation stage of RMB exchange rate in the first half of 2018. After June 2018, in the process of RMB exchange rate entering the depreciation channel, most of the textile foreign trade personnel were subject to the previous exchange loss, and still did not dare to accept orders. This situation continued until the third quarter, when the RMB has a clear signal of devaluation, foreign trade enterprises began to dare to accept orders normally. However, with the further escalation of Sino-US trade frictions and some worldwide geopolitical influence, foreign trade enterprises show some caution in receiving foreign orders. However, according to the data released by customs, the export data of textiles in the whole year still shows a certain growth, but the export target has gradually shifted from European or American countries to Southeast Asia and Africa.



2. Cotton textile products are frequently adjusted in variety structure. In the case of relatively high chemical fibre prices and frequent price fluctuations, downstream textile mills have taken two measures: one is to purchase raw materials for conventional yarns from the point of order, the other is to develop new products with relatively low prices of textile raw materials. For example, at the beginning of the year, cotton and polyester prices were relatively cheap, coupled with the expected reduction in cotton production, polyester had the expectation of rising crude oil prices. Therefore, many textile enterprises adjust their product structure to spinning with cotton or polyester staple fibers as raw materials. This led to a considerable increase in raw material prices in the cotton and polyester industries in the second, third and second quarters. But after entering the fourth quarter, because the prices of these two raw materials rose too fast in the third quarter, downstream yarn mills began to choose viscose staple fibers or other cheaper raw materials for spinning, making cotton and polyester prices in the fourth quarter show a downturn.



In the field of core-spun yarn, acrylic core-spun yarn has gradually replaced viscose staple fiber core-spun yarn and become the mainstream of the market. At the same time, due to the restriction of environmental protection on core-spun yarn dyeing, some yarn factories began to develop and use color modified polyester staple fiber to spin color polyester core-spun yarn. It is in these changes that textiles in the market in 2018 show a lot more categories than in 2017.



3. The product popularity cycle began to shorten, and the speed of opening e-commerce channels quickened. The diversity of yarns facilitates the development of textile terminal products such as garments and home textiles. The fashion cycle of a particular style will be actively curtailed because of the production of goods, which shows that the cycle of the end product is beginning to shrink. At the same time, Taobao, Tianmao, Jingdong, Suning and other large-scale network platforms, the proportion of textile and apparel has gradually increased. After the emergence of new platforms, textile and apparel products will generally be involved. For example, after the emergence of Pingduo, more individual textile businesses emerged. Therefore, the establishment of textile e-commerce channels is much faster than in previous years. In 2018, Tianmao & ldquo; Shuangxi & rdquo; total turnover was 213.5 billion yuan, an increase of 26.2 billion yuan over 2017.93%, and knitted shirts, socks, trousers and other textiles also get a large proportion.



Review of Indicators



Here, we should select the varieties with wide market application and certain production capacity as representatives, such as synthetic fibers, viscose staple fibers and cotton three major textile raw materials, trying to interpret the operation status of textile raw material market in 2018.



Yield



Note: The output data of 2018 are estimated on the basis of January-November.



As can be seen from Table 1, the output of main textile raw materials shows a pattern of increase or decrease in 2018. Among them, the output of spandex, nylon and viscose staple fibers increased. The incremental champion is spandex, which is 12.73% higher than the output in 2017. The increase of spandex production is mainly due to the increase of cotton ammonia-clad products and human cotton ammonia-clad products in recent years. This improvement is due to the need to add more spandex yarn to different fabrics in order to weave more personal and comfortable fabrics downstream. The estimated output of spandex this year is 620,000 tons, which is probably higher than that of & ldquo; artificial wool & rdquo; or acrylic fiber.



The growth of nylon and viscose staple fibers is mainly due to the fact that core-spun yarns made from both are sought after by the market in 2017. At present, the main raw materials of core-spun yarn are nylon and viscose staple fibers. After the development of 2018, the varieties of core-spun yarn have changed from pure & ldquo; 28S imitating rabbit hair & rdquo; to & ldquo; imitating rabbit Velvet & rdquo; & ldquo; seven rainbow core-spun yarn & rdquo; & ldquo; imitating mink Velvet & rdquo; and other types of core-spun yarn. Due to the appearance of this kind of wool-like and wool-like core-spun yarn, its comfort, good handle and appearance wool feel directly reduce the production of conventional acrylic wool sliver. In addition, acrylic core-spun yarn occupies a place in the yarn Market in 2018, but because of the high price of acrylic fibers, the downstream spinning customers and knitted shirt customers are not too keen on acrylic fibers. In addition, the current production of acrylic fibers is relatively limited, which ultimately makes the production and consumption of acrylic fibers shrink substantially in 2018. The production output of acrylic fiber in 2018 is estimated to be 550,000 tons, which is 23.61% less than that in 2017.



As for cotton, although the planting area increased compared with 2017, there were more extreme weather in 2018, especially after the seedling filling period, the weather in some cotton growing areas was worse. According to the forecast data of relevant organizations, in a sense, the cotton output in 2018 is slightly less than that in 2017, which is about 2%. For polyester, the output is mainly controlled by the rising crude oil price from June to early October, and the raw material cost of polyester is gradually rising, which is mainly manifested in the rapid rise of PTA price, which makes polyester factories in some areas take measures to limit or stop production. As a result, the polyester output in 2018 is estimated to decrease by 1.65% compared with that in 2017.



Price



Note: The output data of 2018 are estimated on the basis of January-November.



As can be seen from Table 2, the prices of major textile raw materials show an upward trend in 2018. The main reasons are as follows:



1. After strict environmental protection, the production unit will transfer part of the cost to the product price. Taking the price of viscose staple fibers as an example, the average price in 2018 is about 14606 yuan/ton, which is 7.49% lower than that in 2017. However, from the specific price operation in 2018, there were two surges in May and September 2018. This price rise is mainly due to environmental protection problems in May and September, and the paper industry boom continued to hold high in 2018, resulting in the price rise of raw and auxiliary materials for viscose staple fibers. But from the gross profit point of view, the whole industry or enterprises do not have too much profit, and even some smaller factories, there is a loss phenomenon.



2. Decrease in production, resulting in higher prices. Although acrylic fibers may be less used downstream, the large reduction in acrylic staple fibers production results in a shortage of acrylic fibers in the market, which makes the acrylic industry with the largest reduction in production show a strong rise in price. In Table 2, the price increase of acrylic fibers in 2018 is basically more than 20%.



After March and June, the price of crude oil rose, which led to the price increase of polyester and nylon products ranging from 8% to 14%. Compared with 2017, the price of polyester staple and polyester filament increased by 13.99% and 8.39% respectively in 2018. The reason why the price of polyester staple fibers has increased greatly is that on the one hand, the price base is relatively low, on the other hand, the demand for polyester staple fibers in spinning mills has increased significantly. The increase in demand is due to the fact that polyester staple fibers are starting to exert their strength in other applications besides core-spun yarns, such as T/R blended yarns, which are more popular in 2018, and the output is much higher than in previous years. At the same time, the market of polyester spinning chenille yarn was also opened in the second half of the year, and has a better application in carpet, car interior decoration and other fields. Therefore, the price rise of polyester series, cost-driven occupies only a small part, more downstream demand side is opened, thus driving the price rise of polyester-related products.



FourIncreased yields and uncertain external environment led to price declines for some varieties. Taking viscose staple fibers and spandex as examples, the rapid expansion of production capacity has resulted in an increase in output and supply, to some extent, breaking the original balance between supply and demand, resulting in a general decline in prices. Cotton prices fell sharply in the fourth quarter of 2018, which offset the increase in the second and third quarters, mainly due to factors such as unclear external environment and lower taxes on imports.



Profit



Note: Data are all from
Medium Fiber Networks.


From Figure 1 to Figure 3, it can be seen that in 2018, the polyester and nylon series basically maintained the state of annual profit. Viscose staple fibers and acrylic fibers have experienced 1 to 2 loss periods in the whole year. Among them, the loss period of acrylic fibers series lasts for nearly half a year. Overall, the profitability of textile raw materials in 2018 has a certain correlation with the above-mentioned output and price. The main manifestations are < br />.


1. Although the output of polyester series has been reduced, from the point of view of price and profitability, it basically shows better industry profits.



2. Nylon series from the output, price and profitability point of view, basically belongs to the downstream demand-driven price rise, so the trend of nylon relative to acrylic and polyester fibers to appear strong.



3. Acrylic fiber production decreased in 2018, mainly due to the serious loss of the industry, had to limit or reduce production, until the fourth quarter, the industry began to profit.



FourWhether synthetic or viscose staple fibers, except acrylic fibers in the fourth quarter showed a strong upward trend in profitability, the rest are in a state of gross profit compression.



Start-up rate < br />


Note: Data are all from
Medium Fiber Networks.


From the start-up rate of main chemical fiber varieties, all chemical fiber varieties showed a downward trend in the first quarter of 2018, due to the Spring Festival of 2018 on February 16. Before and after the Spring Festival, the starting rate of nylon dropped sharply to about 50%, while the starting rate of spandex, polyester filament and viscose staple staple staple staple staple staple staple staple staple staple staple staple staple staple staple staple staple staple After the Spring Festival, the working rate of polyester filament, nylon, spandex and viscose staple fibers basically maintained in the range of 75%-88%. Relatively speaking, the starting rate of synthetic fibers is slightly higher than that of viscose staple fibers. But after entering the fourth quarter, the startup rate of viscose staple fiber industry began to rise to 90%, while the startup rate of synthetic fibers was around 80% to 82%. As can be seen from Figure 4, the start-up rate of chemical fibers in 2018 is basically good, mainly due to the support of the downstream textile industry chain.



Inventory



From the inventory point of view, in 2018, the spandex inventory has remained in a state of over 30 days, and even reached a peak of 45 days in September, as shown in Figure 5. Spandex is running in high inventory, mainly because this year's spandex prices show a gradual decline or a negative decline pattern. However, spandex factories believe that in past years there are off-season and peak season, as long as there is funds, inventory from off-season to peak season, basically can make a wave of money. Under this idea, spandex stocks were once high, and eventually had to be transferred by way of price reduction.



The inventory of nylon industry improved in the second half of the year compared with the first half; the inventory of nylon industry in the first half was more than 20 days, but in the second half, the inventory of nylon industry was basically at the level of 15-17 days.



Viscose staple fiber inventory, basically in 5 to 20 days of operation, of which, in late April and early November, the industry inventory is in more than 15 days of operation.



Inventory of viscose staple fiber industry increased mainly because the release of its own new capacity was basically completed in October to November, and the production of the new line to the market needs a certain amount of time.



Looking ahead to the future macroeconomic outlook



From the macroeconomic performance in the fourth quarter of 2018, the global economy showed a certain degree of weakness. This is mainly because the growth momentum of emerging and developing economies has weakened and the financial situation has tightened, so the possibility of stronger than expected global economic growth has declined.



The IMF also lowered its global economic growth expectations. It is not difficult to see that the mainstream institutions in the world are not too optimistic about the macro-economy in 2019. However, the implementation of China's supply-side structural reform has achieved results in many areas. Since the third quarter of 2018, the financial sector has evolved from “ de-leveraging ” to “ stable leverage ” and since late October 2018, the State Council, the Central Bank, the Securities Regulatory Commission and other departments have issued some policies to seek the bottom of the policy. Therefore, it is expected that near the second quarter of 2019, the bottom of the market will be formed under the condition of policy underpinning, and from the second half of 2019, China's macro-economy will be expected to start to improve.



The document "Implementing Scheme for Improving Consumption Promotion System and Mechanisms (2018-2020)" published in October 2018 also marks the future of China's macroeconomic policy. On the one hand, it needs to continue the structural reform on the supply side, on the other hand, it needs to start from the level of stimulating consumption. In 2019, this policy is expected to be implemented in detail. Therefore, from the perspective of demand, after the implementation of the consumption system and mechanism, China's macroeconomic growth point will gradually change from supply side to demand side, thus entering a new round of normalized macroeconomic growth cycle.



The RMB exchange rate in 2019 is about 6.85 as the central trend pattern. From Figure 6, we can see that the RMB is in the depreciation stage from 2015 to early 2017, in the appreciation stage from 2017 to April 2018, and in the depreciation stage from May 2018 to now. At present, the exchange rate of RMB touches the 7-point again. However, some large institutions believe that the possibility of maintaining the RMB above 7 for a long time is not too great, basically 6.85 as the center.



Crude oil price outlook



Under the background of large supply elasticity (OPEC supply has room to improve, high oil price promotes shale oil production) and uncertain demand (the turning point of the current recovery of the United States is approaching, and China's economic growth is under pressure), the capacity reduction caused by the withdrawal of the U.S. from the Iranian nuclear agreement can be digested by other oil-producing countries'increased production, high oil price has endogenous instability and short-term trading factors. Fluctuations occur from time to time, but the probability of oil price centers stabilizing above $100 in the coming year is very low. Currently, the U.S. Energy Information Agency predicts that the WTI crude oil price will be at $69.56 per barrel in 2019, a slight increase of 1% compared with the 2018 crude oil price forecast.6%, which is too conservative. With the higher price trend of the last round of oil boom, the price center of crude oil in New York is expected to be around $75 per barrel in 2019.



Textile raw material market outlook



According to the output, price, profit, start-up rate and inventory of textile raw materials in the fourth quarter of 2018, the output of the whole chemical fiber industry is further increasing. In the fourth quarter of 2018, except for the spandex industry with high inventory, the start-up rate of chemical fibre products remained stable or slightly increased, and the inventory remained relatively stable. However, the inventory of viscose staple fibers rose rapidly in the fourth quarter. It is not difficult to see that the new production capacity of viscose staple fibers will be gradually realized in the fourth quarter.



From the point of view of price and profit, the prices of most products in textile raw material market have declined in the fourth quarter of 2018, but the acrylic fiber price which has been losing money has increased to a certain extent in the fourth quarter, and has got rid of the loss of the industry. From the profit situation, the profits of polyester, nylon and viscose staple fibers are being gradually swallowed up by their costs. The price trend of these three textile raw materials in 2019 is expected to gradually reduce the start-up rate under the circumstances of high cost and large stock. After the product price reaches the break-even range, the start-up rate will remain around 3-4 months. It is expected that the prices of these three textile raw materials will begin to rise gradually after the downstream products have been digested. Generally speaking, because of the rapid expansion of production capacity, it is difficult for prices to fluctuate greatly under the weak balance between supply and demand.



At the same time, due to the low price of conventional varieties, downstream textile mills and brand apparel companies may fall into the misunderstanding of & ldquo; new product development & rdquo; that is, continuously investing funds and manpower to develop yarns and fabrics in some niche areas to promote fashion trends. In this process, it is expected that the textile cycle in 2019 will be faster than the current & ldquo; three-year product cycle & rdquo; that is, it is possible to appear & ldquo; imitation speed is not as fast as innovation speed & rdquo; the pattern, resulting in a number of small areas of yarn or fabric inventory pressure throughout the industry, which needs to be guarded against. In summary, in the first half of 2019, when the overall macroeconomic expectations are stable and skewed, the textile raw material market will likely appear spontaneous production restriction behavior of raw material enterprises such as ldquo, quotation for limited production, rdquo and so on. But because crude oil and macro-economy are favored by most people in the second half of 2019, it is expected that textile raw material market will step out of the quagmire of the fourth quarter of 2018 and start a new round of industry cycle in the second half of 2019.