Apparel / Textiles & Accessories

"Orders have dropped a lot now. All orders in July and August have been shipped, but customers have not added any more orders. The peak period is in March and April, when the orders were the most." On August 13, a clothing manufacturer in Shantou, Guangdong Mr. Lu told Times Finance that the hot clothing exports in the first half of the year seemed to be a bit "stopped".

According to data from the China Chamber of Commerce for Import and Export of Textiles, from January to June 2021, the cumulative export of textiles and apparel was US$140.086 billion, and the cumulative export of textiles and apparel increased by 11.9% year-on-year. According to incomplete statistics from Times Finance, about 43 listed companies in the textile and apparel industry have recently released performance or performance forecasts for the first half of the year, and 38 companies have expected to increase their performance, increase in the same direction, or turn losses into profits.

Among them, Shenzhen Textile A (000045) expects semi-annual net profit attributable to shareholders of listed companies to be 63 million to 90 million yuan, an increase of 8650% to 12400% year-on-year; Xinfengming (603225) is expected to return to the parent in the first half of 2021 The net profit was 1.3-1.35 billion yuan, a year-on-year increase of 549%-574%; Blum Oriental (601339) achieved a net profit of 550 million yuan attributable to the parent, a year-on-year increase of 304%...

"The return of global orders to China that began last year due to the epidemic has been continued this year." On August 13, the knitted sportswear export company Jiansheng Group (603558) released a semi-annual performance report. The company’s net profit in the first half of the year was 108 million yuan. A year-on-year increase of 96.4%. Regarding the reasons for the significant increase in performance, the semi-annual report mentioned benefiting from the "return of orders."

Right now, the situation is changing.

According to data released by the General Administration of Customs recently, clothing exports and textile exports both fell in July. Settled in RMB, textile and apparel exports were 181.39 billion yuan, down 18.24% year-on-year, up 1.82% month-on-month, and down 4.21% year-on-year; of which textile exports were 75.06 billion yuan, down 33.73% year-on-year and down 6.90% month-on-month, compared to the same period in 2019. An increase of 1.30%; clothing exports were 106.33 billion yuan, a decrease of 2.08%, an increase of 9.03% from the previous month, and a decrease of 7.76% from the same period in 2019.

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

"The large decline in textiles and clothing is largely due to the resumption of export orders from the textile industry in some Southeast Asian and South Asian countries, especially India and Bangladesh. Some of the original orders that were'returned' to China went back." August 13 Day, Bai Ming, deputy director of the Marketing Research Institute of the Ministry of Commerce, pointed out in an interview with Times Finance and Economics.

Mr. Lu, who is engaged in clothing production, also agreed, “If the epidemic in other Southeast Asian countries eases in the first half of this year, domestic orders will decrease, and then the prices of raw materials will fall.”

1. "Return" orders have slowed down significantly

Although the first half of the performance of listed textile and apparel companies frequently reported good news, but in RMB settlement, the total textile exports in the first half of the year were not as good as 2020. According to the statistics of the General Administration of Customs, from January to July, the total export of textile and apparel was 1,090.21 billion yuan, a decrease of 0.93% year-on-year; of this, textile exports were 519.89 billion yuan, a decrease of 17.94%, and clothing exports were 570.32 billion yuan, an increase of 22.17%.

If calculated in U.S. dollars, the apparel export situation is slightly better, but textile exports also experienced double-digit declines. From January to July, the cumulative export of textiles and apparel was US$168.351 billion, an increase of 7.73%; among them, the export of textiles was US$80.252 billion, a decrease of 10.80%; and the export of clothing was US$88.098 billion, an increase of 32.89%.

“my country’s textile and apparel export markets are concentrated in the European, American, and Japanese markets. With the increase in vaccination rates in these countries and the normalization of herd immunity, their imports of textile anti-epidemic products have declined significantly, and some developing countries have gradually resumed production, with orders returning and Transfer. In addition, due to the rapid resumption of work and production in China, and the large export base of related textiles last year, it is inevitable that exports of such products will decline year-on-year." analyze.

Regarding the slowing trend of backflow orders in July and August, Bai Ming said that the epidemic 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. Therefore, there was a shift in orders from July to August.

Lan Qingxin further stated that in addition to the return of orders is an important factor affecting the growth rate of exports, rising costs and slow economic recovery are also a major reason for suppressing demand.

Regarding the decline in textile exports reflected in the statistics of the General Administration of Customs, Mr. Lu is engaged in production on the front line, and he feels more intuitive. Mr. Lu said, “I felt it in the first half of this year. Whenever the foreign epidemic eases slightly, foreign trade orders will decline.”

When Times Finance asked whether Mr. Lu and the small and medium-sized business owners around him were worried about not having orders, Mr. Lu said frankly, “The price of raw materials in recent times is the highest in two years. It doesn’t matter if you can’t receive the order, or you will 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. Times Finance reporter called Xinfengming (603225) Investor Relations Department of a modern large joint-stock company integrating polyester, polyester spinning, texturing, and import and export trade as an investor on August 13. The staff said that recently The situation of exports in July did decline. “The relationship with the epidemic will definitely have some impact.”

When Times Finance asked whether it was due to the increase in shipping prices, the staff of Xinfengming said, “There are also factors that increase shipping prices. Exports of goods may be hindered, but we mainly sell more domestically, and exports account for more. It will be smaller."

As of the close on August 13, Xinfengming rose slightly by 1.45% to 20.30 yuan.

2. Still facing many uncertain risks

As the epidemic hits to find alternative orders, it is destined not to last long.

Bai Ming pointed out, “In recent years, China’s outward transfer of orders was only a special situation last year. Many Chinese factories resumed work and production at the earliest. In many countries, where the epidemic situation is still serious, it has affected their textile exports and customers can’t wait. I went to China to buy textiles. Now that the production capacity of those countries has recovered, the customers ran back."

Large-scale domestic textile and apparel companies are also “knowledgeable” about the temporary nature of the return of orders. Jiansheng Group pointed out in the third section of the “Management Discussion and Analysis” of the semi-annual report that “the cost of elements is lower and tariff disputes are less disturbed. It is still a general trend for Southeast Asian countries to transfer low- and mid-range production capacity."

With the gradual normalization of global epidemic prevention and control, the trade demand for epidemic-related items has weakened, and many manufacturing countries have restarted production. Li Xingqian, Director of the Foreign Trade Department of the Ministry of Commerce, stated on July 22 that this is a challenge for China’s foreign trade. It is also an opportunity.

"On the one hand, my country'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 my country's capital goods and intermediate goods has increased significantly."

Regarding the possible impact of restarting production in many manufacturing countries, Li Xingqian said, “At present, we are closely tracking changes in the foreign trade situation. In the second half of the year, we will focus on the outstanding difficulties and problems faced by enterprises. Policy measures to effectively reduce the overall cost of foreign trade enterprises."

The textile industry is closely related to the macroeconomic environment and relevant national policies. At the moment, the global epidemic alert brought by the delta mutant strain has not been lifted, and a mutant strain named "lamda (λ)" has begun to emerge again, causing the development of the domestic textile industry to face many uncertain risks.

Lan Qingxin suggested that in the second half of the year, export companies should further tap their potential, reduce costs from the perspective of increasing efficiency, diversify their export markets, and use more cross-border e-commerce methods to actively explore overseas demand. At the same time, adjust production capacity appropriately, and don't blindly expand production and increase inventory.

It is worth mentioning that, according to data from the China Chamber of Commerce for Import and Export of Textiles, as of the end of July, rising freight rates and port congestion have not yet been fully alleviated, becoming the biggest uncertainties affecting exports in the second half of the year. The increase in the price of upstream raw materials caused by global inflation has not been transmitted to the simultaneous increase in the sales price of downstream finished products. The total export price of knitted garments in the first half of the year fell slightly by 0.8% year-on-year.

In addition, the domestic CPI and PPI scissors gap has been running at a high level for nearly half a year. Under the dual impact of rising raw materials and weak consumer end, downstream apparel companies, especially small and medium-sized enterprises, may be in a situation where their profits are constantly being compressed.