Textile And Garment Industry: Start Losing Money Rather Than Stop Work

The garments produced by Li Cheng are sold to Europe. The main customers are some commercial chain organizations, and some other famous brands are also OEM.

The rise in labor costs in the first half of the year has given Li Cheng a great test. The price of raw materials surged in the second half of the year.

"Although our production costs soar, we can

Like Li Cheng, Liu Bisheng, chairman of Foshan Anthony Knitting Co., is also suffering from the rise in raw material prices. The rise in cotton prices has left the company at the critical point of profit and loss. If cotton prices continue to rise, the company will lose money.

"Although raw materials have gone up, it is difficult for us to raise prices to downstream brands. Last year, the price of 110 yuan clothes could only be raised to 120 yuan this year, and the price of finished products is far lower than that of raw materials."

Liu Bisheng explained that in the environment of rising prices of raw materials, small and medium-sized manufacturing enterprises have become the most vulnerable ones.

Cotton price per day, clothing companies must also be ready to pay a considerable amount of cash, after purchase can quickly purchase fabrics, lock costs, otherwise it will lose money because of the rise in cotton prices.

A company in Taizhou, Zhejiang, advocated training and learning. It also revealed that in addition to the rising prices of raw materials, there had been a time when the upstream cotton merchants stopped stockpiling and sold cloth and the shortage of fabrics made it impossible for a skilled woman to cook rice without rice.

"Because clothing companies usually purchase raw materials and arrange production after receiving orders, enterprises usually do not store too much fabric. In nine and October cotton prices went up fastest, they could not buy cotton cloth with cash, and upstream materials merchants hoarded up cloth and waited for the price to rise."

Zhang Peixue said that only waiting for the state to introduce policies to reduce cotton and cotton prices.

Cotton is one of the biggest raw materials in the past two months.

China Cotton Association website data show that in September 1st, China's cotton price 328 index was 18002 yuan / ton, in November 12th, the price index has soared to 31281 yuan / ton, two months up 73.76%.

Meanwhile, Zhengzhou cotton rose from 17895 yuan / ton in early September to 33720 yuan / ton in November.

China Textile Network experts said that cotton prices skyrocketed, but also led to a number of alternative materials such as polyester, chemical fiber, polyester fiber, artificial cotton, wool and other prices have risen to varying degrees.

Pan Rihui, Secretary General of Dongguan textile and garment industry association, pointed out that cotton generally accounts for about 40% of the cost of clothing. If the price of cotton rises by 5%, the profits of enterprises will drop by 2%.

At present, the profit margins of China's textile industry are very low, some enterprises even lower than 3%, cotton prices have risen sharply, and enterprises are easy to fall into losses.

Analysts believe that the current round of rising cotton prices is a concentrated expression of the contradiction between supply and demand, high inflation and hot money speculation.

First of all, the climate is unfavourable, and cotton production has been greatly reduced. This year we expect to reduce production by more than 10%.

Followed by the resumption of growth in China's textile industry, demand recovery has brought support to the cotton market.

The three is the flood of liquidity. The depreciation of the US dollar has led to a sharp rise in international cotton prices.

Finally, the speculation of hot money, especially after the introduction of the real estate control policy, a large number of hot money poured into the upstream links such as cotton purchasing, resulting in a sharp rise in prices.