Apparel / Textiles & Accessories

On May 17, India had 281,000 new confirmed cases of new crowns. In the past 24 hours, India has added 281,386 new cases of new crowns, and the total number of confirmed cases is close to 25 million.

The raging new crown epidemic in India has not only dragged down the country's economic recovery, but also affected the supply chain of many industries around the world. The textile industry is one of them. Recently, there has been news that a large number of textile orders from India have been rushed to the Chinese market. However, the reporter's investigation found that although many domestic companies have indeed received some transfer orders, these orders are not as "good" as imagined.

Xu Dong, the person in charge of a large textile company in Shandong, said: “The return orders are not all placed by Indian customers, but directly placed by European and American customers, and some are transferred through Southeast Asian customers. We also received a small order last month. The production volume of this batch of orders is not large, but the delivery time is short, only 3 weeks, so the profit is not high."

Regarding the backflow of Indian orders, some textile export traders in coastal areas feel that they are not strong, "These so-called backflow orders are mainly low-end processed products, and most of them are'small and short' orders, so we generally do not accept them. The profit is not high and the risk is high, because once the epidemic situation improves, these orders will be transferred back. If it doesn't, the wife will lose money." said Mr. Chen, general manager of Zhejiang Ningbo Shuntong Export Trade Co., Ltd.

The epidemic is raging and orders are transferred to China

As we all know, India is the world's largest cotton producer. The textile and apparel industry is one of India's largest sources of foreign exchange income. The textile industry accounts for about 15% of India's total export income. As a labor-intensive industry, textiles and garments have been severely affected by the epidemic this time. According to data provided by Wozil Consulting, in the clothing cities of Delhi and Bangalore, the labor absenteeism rate in the clothing industry is as high as 50%; last year, the consumption and exports of the clothing industry in India decreased by 30% and 24% respectively.

Figure 1: The cumulative growth rate of India’s exports of textiles and garments since the 2020-2021 fiscal year

Source: China Textile Federation Industrial Economic Research Institute

As a result, many international buyers have already heard the news and turned their orders to China. West China Securities analyst Tang Shuangshuang pointed out to reporters that India's yarn production capacity accounts for more than 20% of the world's total. If Chinese companies can successfully win more Indian orders, the domestic textile industry may also benefit from the Indian epidemic in the short term.

Market data showed that cotton futures prices recovered 15,000 points in mid-April, and have since steadily increased. In the last week of April, he hesitated below 16,000. However, after the return of the May Day holiday, the bulls once again exerted their strength and finally succeeded in reaching 16,000 points in cotton futures on May 7 and hitting a two-month high.

After the May 1st, cotton yarn prices have also risen across the board. Zheng Cotton’s main contract has risen from 15,530 yuan/ton to 16,250 yuan/ton, and the cost of cotton yarn has risen accordingly. In addition, India, Pakistan and other Southeast Asian countries' "closures" and unstable freight channels have not only led to the return of short-term orders, but also long-term orders from countries such as Europe, the United States and Japan have gradually overflowed. Domestic textile and clothing enterprises have fallen in concern and sentiment to receive orders.

In fact, as early as October last year, when the second wave of the epidemic appeared in India, many textile orders were transferred to China. A textile factory in Hebei stated that starting from September 2020, the company’s overseas orders on the Internet platform have rapidly increased, mainly from the Indian market. In just one month, the order for towels reached 2 million, which is equivalent to twice the same period last year. ; A private enterprise in Jinhua, Zhejiang, even received a large export order for hundreds of thousands of tablecloths from the international brand ZARA, and this order was originally produced by an Indian company.

Blum Oriental, the domestic leader in color spinning, showed strong growth in the first quarter due to the recovery of overseas orders and the expansion of production capacity. According to the company's performance forecast for the first quarter of 2021, net profit attributable to the parent increased by 135 million yuan to 164 million yuan, an increase of 190% to 230% year-on-year.

An insider of Blum Oriental said that the company accepted a wave of backflow orders in the second half of last year. Since the fourth quarter of last year, the company's order situation has been very good, and it is close to full production. According to the order scheduling situation, it is prudently estimated that the performance in the first half of this year will achieve a sharp increase compared with the same period in 2020 when the base is relatively low, and even better than the same period in 2019 before the epidemic.

The recovery of demand in the international market and the stability of the domestic supply chain have directly driven my country's textile and apparel exports. Data show that in the first quarter of this year, China's textile and apparel exports were US$65.1 billion (approximately 421.4 billion yuan), a year-on-year increase of 44%. Among them, textile exports were US$31.81 billion (approximately 206 billion yuan), a year-on-year increase of 40.3%; clothing exports were US$33.3 billion (approximately 215.5 billion yuan), a year-on-year increase of 47.7%.

Return orders are mainly "short and small"

Regarding the news that a large number of textile orders from India are rapidly transferred to the Chinese market, in the eyes of professionals, it is normal market behavior for multinational companies to adjust order production on a global scale and international buyers to select suppliers based on production capacity.

Candela Port, India announced the suspension of operations on April 24

Xu Dong said that although overseas orders have recently returned, the contract prices of these orders are mostly uncompetitive, and they are all low-end and medium-end processed products, and their profits are not high.

An industry source also said: “Downstream brands can refund as long as they cancel the order without paying the balance. Such orders are transferred quickly, and buyers pay more attention to price and delivery speed. The sustainability and profitability of transferred orders The situation is not too optimistic."

More importantly, this year's increase in raw material prices has squeezed corporate profits. Therefore, even if orders have increased, many companies may end up losing money and earning praise.

The aforementioned Ningbo export trader, Mr. Chen, said, “Last year, the company’s profit was about 10%, and this year may not be 5%.” Therefore, he is very cautious about taking orders and would rather not do it than lose money.

After India’s vizag announced force majeure from May 5 to May 19, according to sources from the World Wide Web, Tamil Nadu in southern India began a two-week blockade from 4 a.m. on May 10 until May 24. Japan to contain the spread of the new crown pneumonia epidemic. Karaikal, the port of Tamil Nadu, also announced force majeure from May 10 to May 24. In view of the above, the operations/operations of Karaikal Port (including but not limited to unloading, loading, receiving and dispatching) have been severely affected.

Therefore, in Xu Dong’s view, Chinese companies need to be very cautious about receiving orders from India, Myanmar and other countries. Due to various reasons such as the epidemic, port closures, and logistics suspension, buyers may not be able to receive the goods on time, resulting in delays, defaults, or even abandonment. Single phenomenon.

Under the impact of the epidemic, the supply of India, the second largest textile manufacturer and exporter, "turned off", accelerating the start of a new cycle in the global textile and apparel industry. China is the country with the most complete textile industry chain in the world, but its current advantages are mainly reflected in the stability and safety of the supply chain, and the upgrading of the industrial chain in recent years has also enhanced the competitiveness of the textile industry.

According to the China·Keqiao Textile Index forecast, although exports will continue to grow in the second quarter of this year, the growth rate will return to normal levels, and my country's textile and apparel exports will continue to achieve recovery growth.