The 1st Anniversary of Cotton Surges

In mid-May, Zhangjiagang Bonded Area, from the cotton delivery warehouse to the cotton spinning factory, the air is filled with the smell of cotton.

"We are suffering heavy losses now. I'm afraid that it is a dead end." The head of a textile company is sad. At this moment, cotton fell by 30% from the price of mad cows. Most small and medium-sized textile companies are in trouble because of high-value inventory and lack of downstream orders. The reporter could not help but remember that in 2010 a textile factory in North China took a job scene of a female textile worker: At that time, the price of cotton soared, and the textile industry was in the spring of ten years. It was a thriving scene.

In the past year, cotton has transformed itself from a rare breed of people into a celebrity in the gambling market, once surpassing the status of copper in the market. The price soared from 17,000 yuan per ton in May last year. It rose to nearly 35,000 yuan in November of last year and February of this year. It now drops to around 25,000 yuan, making the entire industry feel a sense of "underground". It also exposed the weaknesses of the "cottage on the heavens" of the cotton textile industry.

**Corporate sources told reporters that compared with the non-ferrous metals companies that have been immersed in the market for many years, the use of hedging by textile companies is “more childish”, and they have learned a lot in this unprecedented wave of commodities.

The reality of cotton spinning enterprises in the past year as the largest bulk logistics distribution base in the Yangtze River Delta region, Zhangjiagang Bonded Area has a large number of imported cotton, PTA, wool, linen and other spot trading varieties arrived in Hong Kong. On the banks of the Yangtze River, the reporter saw and heard the true status quo of cotton and chemical fiber textile companies. Mr. Jiang, project manager of the textile raw material market in the Zhangjiagang Free Trade Zone, patiently introduced cotton varieties and stocks and explained the process from cotton to yarn.

Prior to this reporter did not expect to uncover the "wound" of textile companies. Because in the past year, cotton and cotton yarns were too hot. In August 2010, the vice president of a textile company in East China told reporters that “Since September 2009, the price of cotton and yarn has been rising, and the textile industry has enjoyed a good market. There has been a period of time when companies even voluntarily raised prices to purchase cotton yarn. This is something that has not happened in the past decade and is an abnormal year."

To describe the last year and this year's textile enterprises with a sentence of "hebei in the 30 years and Hexi in 30 years" may be cruel. However, during the inspection process, the reporters heard the most "This year's textile companies have a hard time." At the investigation meeting of the textile raw material industry chain in the Zhangjiagang Free Trade Zone, many heads of textile companies stated that the price of cotton soared from 9,000 yuan in 2009 to 35,000 yuan in February of this year, and then fell from 35,000 yuan to 25,000 yuan, "the fluctuation of commodities Too big, we really can't stand a small business.”

According to a team of agricultural products (000061) that New Lake ** surveyed in Jiangsu revealed to reporters, about 30%-40% of small and medium-sized textile enterprises have closed.

"We are now suffering a heavy loss and a dead end. Last year, the company's economic efficiency was above 20%, and this year's economic efficiency was zero." A person in charge of a textile company, who declined to be named, told reporters that "economically viable enterprises are also Support for a period of time, but the lack of strength of small businesses is bound to die a large part."

Liu Shibo, executive vice president of Jiangsu Tianba Group, reluctantly said, "Most textile companies can't go on business. If the market is not going well in June, small businesses can't stand it." He said that when the company started construction in March, the owner of the business still returned. Quite happy, but because of the small number of orders, lack of funds, cotton prices fell sharply, and the high price of labor in the Yangtze River Delta, especially Suzhou, textile companies can not stand.

“The days of textile companies are not very good now. In the short term, Heze’s textile companies are short of liquidity and they are taking delivery of goods. This will continue for a while. Larger companies will either change spinning or limit production. It is expected that the end of May and early June will be the period of heavy farming.” Zhang Huaige, Heze Hongyi Industrial Development Co., Ltd. also told reporters.

On May 26th, at the Shanghai Yinhe Hotel, hundreds of miles away from Zhangjiagang, a summit on cotton spinning and chemical fiber was held here. Corporate representatives from all over the country almost met each other and asked the same question: "What do you think about cotton?" And the answers are basically all "not to say, not clear."

A textile company official from Shijiazhuang, Hebei province, arrived at Hongqiao Airport and complained to reporters about the difficulties of the industry. "The shortage of funds, the accumulation of inventory for two months, and even some large businesses have taken the opportunity to take advantage of malicious orders." The responsible person said that fortunately, at the beginning of the year, "what orders were received, what prices were done, and now there are still Lively.” For some small and medium-sized enterprises, if the cotton price is judged to rise at the beginning, and some low-priced orders are not taken initiatively, and the stocks bought at high prices are guarded, then it is indeed a matter of life and death.

Causes Three factors have caused textile companies to be injured Cotton is the raw material of textile companies. Should raw materials fall? Why does it cause a major loss to the company?

“This is actually a misunderstanding,” said Dong Shuzhi, cotton business manager of Peking University’s Founder Products Group. “The cotton industry starts with raw materials. It first goes to cotton yarn, then to fabrics, then to printing and dyeing, and finally to clothing companies. Therefore, the textile industry is a “middle”. Industry. Downstream, once the price of cotton is seen falling, the “following mentality” of “buying up and not buying down” will reduce orders for upstream companies. However, the textile industry is also out of this mentality, will reduce the demand for cotton, resulting in continued decline in cotton prices, the downstream companies wait and see mood is more concentrated, so it will produce a "price drop cycle."

According to Liu Shibo, the company purchased 10,000 tons of cotton last year, but it did not purchase this year. Some people say that it is not known whether the market outlook cotton will fall. Some people also say that the company seems to be brewing a collective bargain-hunting fund. At that time, the influx of funds may raise the cotton price. But everything is just speculation.

There are three major factors behind the current difficulties.

The first is raw material procurement mistakes.

"When cotton prices rose sharply in the early stage, companies worried about raw material shortages and rushed to buy cotton in large quantities," said Liu Shibo. At that time, the average purchase cost may be more than 26,000 yuan/ton. At present, the price of cotton has fallen below 26,000 yuan, and the value of raw materials has shrunk. Loss. In addition, because raw material prices have soared in the early stages, companies have a large amount of inventory that occupies huge amounts of capital, thus making cash flow difficult.

Zhang Huaige also told reporters, "The majority of textile enterprises' early-stage inventory has been consumed, and very few of them have pre-inventory inventory, and the cost was 26,000 yuan/ton. According to the current cotton cost calculation, textile companies can only pay for electricity and other expenses. Balanced, unprofitable."

In fact, the fluctuation of cotton price is also affected by the downstream cotton yarn price. Today, the price of cotton yarn has fallen by more than 10,000 yuan from its highest point, and its fluctuations are even worse than cotton prices.

Followed by a huge inventory overwhelmed.

According to a research report on the management of large and medium-sized textile enterprises by an authoritative organization in the industry, inventories of cotton stocks and cotton yarns of textile companies only decreased slightly in May from the previous month (cotton stocks fell from 61.9 days to 57.3 days, and cotton yarn stocks decreased from 49.6 days to 44.3 days. ), Destocking is still a long way to go. The profit of cotton yarn production changed from 169 yuan per ton of profit to 286 yuan per ton, and some small plants were closed. In terms of cotton varieties, the cotton utilization rate has dropped significantly, from 36.5% to 19.3%, and the utilization rate of Xinjiang cotton and real estate cotton has increased, indicating that the downstream consumption is not booming, making cotton mills less willing to use relatively expensive cotton. Switch to cheaper domestic cotton.

The third is aggravated by tightening policies.

Xiao Fangyu, vice president of Huafang Group, said that the country’s tightening monetary policy has also had a major impact on textile companies. Under the pressure of the policy, cotton prices have fallen and corporate profits have fallen. In addition, the central bank continues to curb inflation by raising interest rates and raising the deposit reserve ratio, which also results in a shortage of corporate credit funds.

“The current monetary policy is like 'chemotherapy', and the country raises the reserve requirement ratio by 0.5 basis points at a time, which will increase the impact by more than 8 times for the enterprise. Therefore, the tightened monetary policy has a greater impact on textile companies. Zhang Huaige said,

Enterprises cannot cut back or stop producing without restraint. Although it is not profitable, the textile companies are still in production, mainly to keep workers. In addition, if the machine is stagnant for a long time, it will cause great damage.

Therefore, the fate of textile companies has been closely linked with the future market of cotton.

Once the good days in the mad cow had gone. "At the beginning of the year, the company also persuaded us to do more, saying it would rise to 50,000." This is a textile business owner complained to reporters, he wrote Depressed and helpless.

This is the market mentality of cotton at the time of climax, and we must start from this round of the market.

Since 2009, cotton has entered a rising channel, and 9,000 yuan of cotton has risen to 35,000 yuan. The real start of the Mad Cow market for cotton is almost around June of last year. In the industry, when the price of cotton rose to about 17,000 yuan, it was already "high above the cold" when the real big market suddenly started. Both the volume and the price have soared. Both the fundamentals and the funds have been promoted. Next, Cotton ** became one of the leaders of the 2010 commodity bull market.

At the same time, the price of yarn also rose along with cotton prices, and the yarn price rose more than cotton prices. Driven by this, the textile industry's sales profit rate has reached a new high since March 2006. From the point of view of gross margins, both the textile industry and the downstream textile and clothing, shoes, and cap manufacturing industries are all located above the 10-year average.

With the recovery of downstream textile market demand, cotton yarn prices have risen sharply as cotton prices have risen. The 2010 performance of listed companies related to cotton textiles is also quite bright. The annual reports of listed companies in the A-share textile industry, such as Huafang Textile (600273) and Huafu Color Spinning (002042), are quite brilliant. Huafu Spunlaced said, “Because of the short industrial chain of color spinning yarn, the cost-shifting ability is strong. Since 2010, the price of main raw material cotton has increased by over 100%, the average yarn product has increased by 80%, and the company’s color spinning yarn products have also taken the initiative. price."

"Last year was indeed a good opportunity to invest in the stocks of the textile industry." Dong Shuzhi, manager of Cotton Business Department of Peking University Founder Group, said.

In the second half of last year, the cotton business inventories were extremely low, because the reduction in the area of ​​cotton planted in the year, bad weather, and consumer warming caused the consumption gap to increase, and a large amount of inventory was digested in the previous year. Low inventory is difficult to meet the needs of enterprises with cotton, the expansion of business demand is holding up the price of cotton, the rise in cotton prices led to the rise in yarn prices, which is the reason for the strong influence of the interaction between cotton prices and yarn prices in 2009-10.

At the end of August 2010, Liu Zhong, a vice president of Henan Zhongfang Industry (Group) Co., Ltd., told reporters: “At present, the company's operating rate is 100%, the downstream is smooth, and product sales are fast. Finished goods inventory is less than 10 days.”

Analysts told reporters that the rare supply gap in recent years has driven domestic and foreign cotton prices into a typical bull market, which in turn has driven the entire cotton trade and textile industry in the 2009-2010 season. Due to the time effect of price transmission and the different levels of price acceptance in the industry chain, trade and textile industries in the upper reaches of the industrial chain have benefited significantly from this round of cotton bull market, while the downstream weaving, textile and apparel industries are at average levels in recent years. .

With the rise in prices, the cotton industry has become a star of the world. The Zhengzhou Commodity Exchange, which traded in cotton, became the largest commodity exchange in the country. The pattern of the entire Chinese industry has changed dramatically due to cotton.

From the end of February to the end of May, for a period of up to three months, the total turnover of the Zhengzhou Stock Exchange has been reduced to the old Shanghai Stock Exchange. What is more, on some trading days, the turnover of cotton alone accounts for nearly 40% of the turnover of the entire commodity market. Take April 7 as an example. Today's cotton turnover was 272.57 billion yuan, while the daily turnover of the Shanghai Stock Exchange was only 187.5 billion yuan, and the daily turnover of the Dalian Commodity Exchange was only 95.5 billion yuan, which means a Cotton hits the entire Shanghai market and is almost the sum of the Shanghai and Dalian markets.

Not only is it domestic, but cotton is a magnificent scene. US cotton rose from 80 cents in June last year and has risen to the peak of 219.7 cents, an increase of more than 170%.

“The domestic cotton textile enterprises are not prepared enough in the sudden big market,” said Xinchao Yan Chaochao, an analyst at Xinhu.com, because the history of cotton ** in China has not been long, and the previous years have been the trend of warm water. Therefore, the lack of training for companies on hedging is not the same as the mature operations of non-ferrous metals and oil companies. The entire industry is unfamiliar with ** tools, but also makes prices soar and plunged, causing a drastic change in the industry environment.

Lessons learned textile companies need not make up for "hedging"

“Hedging” refers to the use of **contracts as a venue for transfer of price risk, using **contracts as a temporary substitute for future purchases and sales of goods in the spot market, and the sale of goods after it is ready to buy or for the future. Need to buy the price of goods for insurance transactions. For example, a farmer sells future harvested crops at a fixed price before harvesting in order to reduce the risk of falling crop prices at harvest. ** The role of the market is to reduce the impact of price surges and plunges on the normal operations of companies.

Some cotton textile companies are also deeply concerned about the importance of price. Now every company will refer to Zhengzhou's future cotton prices. “Basically, every day they look and they will participate.” The reporter noted in this investigation that trade The introduction of cotton and PTA** by business and downstream companies was relatively positive. The price discovery function was prominent and guided the direction of changes in the spot market. Traders' quotes often have to refer to the trend of **. The prices of textile raw materials and products fluctuate drastically. Spot companies and traders can only use this risk management tool to stabilize their operations.

But on the operational level, companies obviously need to improve. Some companies attribute the hedging protection to the “flicker” of the company, which also indicates that these companies have not yet established their own hedging concepts and hedging teams. There are textile business owners frankly, the current domestic textile companies and there is no real sense of hedging.

Although domestic companies are very immature in their hedging operations and have relatively little knowledge of hedging, they also tend to deal more with foreign investors who are good at hedging in real trade. "As a company, the real feeling is that the supply of Louis Dreyfus, one of the world's grain giants, is the third largest grain exporter in the world. The supply is relatively stable, because its operation in the market is mature, not There are often problems with Indian merchants who do a lot of work, "said one business owner. "From the perspective of foreign investors, we can see the importance of the **."

According to industry insiders, in the non-ferrous metal industry and the oil and fat industry, major companies have a large amount of talent and experience in their own hedging operations. For example, COFCO's operation on hedging is quite successful.

After the cotton textile enterprises have experienced this great market, they must gradually understand the "doorway" of the **. "Even if the price of cotton goes up again after a while, the industry crisis is solved, but this course must be learned."

The pessimistic mood seems to be spreading at the moment when the outlook is most pessimistic or has passed. "According to the current situation in the external market, textile companies may find it difficult to see hope in two to three years," said Liu Shibo, Jiangsu Tianba Group. However, many industry experts believe that although domestic textile companies have encountered bottlenecks, they are not too pessimistic.

Xu Wei, an analyst at Nanfang Securities, said that the tightening of domestic monetary policy and the appreciation of the renminbi have had a negative impact on the overall operation of the textile industry. The decline in the price of textile raw materials has also shaken market confidence, but China The international position of the textile industry is still irreplaceable. It is reported that the 109th session of the Canton Fair exported 36.86 billion US dollars, an increase of 5.8%.

The reporter learned that orders for some large textile companies have not been drastically reduced. Huafang Group Xiao Jingyi stated that “accepting a lot of orders in recent days, orders are relatively stable. However, although export orders have been reduced this year, they will not suddenly disappear. In the short term, China’s textile foreign trade status cannot be replaced. ”

Dong Shuzhi told reporters that the operating rate of large and medium-sized textile enterprises surveyed in May increased from 86.9% to 95.3%, which indicates that orders received by large and medium-sized textile enterprises may be related to the organization of the Canton Fair. However, as the textile companies in the Canton Fair are mainly short-listed and are not willing to accept long-term orders, the increase in the operating rate is also likely to be short-term.

Some people in the industry also believe that the “murderer” that causes the textile companies to get into trouble will also stabilize after the continuous decline. Peer-inspected traders also expressed their optimism for the cotton market that the company plans to take orders in the September contract.

"Although the overall inventory is relatively high, the supply of high-grade cotton is still tight. With the support of the country's purchasing and storage prices, some cotton traders believe that the cotton price of 24,000 yuan/ton has a certain margin of safety and the low price is reluctant to sell," said Xu Wei.

In fact, the price of cotton in recent days has shown signs of stabilization. As the speculation of the “weather market” for agricultural products heats up, the prices of the whole agricultural product sector have risen. The cotton prices in early-stage oversold have also rebounded, and the price of the Zhengzhou cotton main contract has returned to more than 26,000 yuan. Perhaps in a short period of time, cotton textile companies can "sniff" again.

Under heavy pressure, Liu Shibo believes that for textile companies, timely implementation of industrial transformation and upgrading is the key. Regarding the transfer of enterprises, Liu said that there are indeed areas that have considered transferring labor to land and land costs. However, because of the cross-provincial investment issues, there are still many concerns. Most enterprises believe that they are operating locally, communicating with the government in a timely manner in terms of policies, and doing things in a more convenient manner. Therefore, the feasibility of enterprise transfer needs careful consideration.

Some people in the industry pointed out that the textile industry needs to improve its competitiveness. Liu said that the loss of orders reflected at present can only be said. The most fundamental reason is that the technical content of the textile industry is low, so the barriers to entry are low. When large market fluctuations are encountered, small businesses are particularly vulnerable to being eliminated.

The reporter noted that on the other side of the industry, a new phenomenon is also emerging. When cotton prices are high, companies choose to use a material instead of cotton for textiles in order to save costs. And this material is PTA. The downstream extension products of PTA are mainly polyester fibers, commonly known as polyester. Polyester is the main raw material for the textile industry. Cotton yarns generally account for 60% of textile raw materials, and polyesters account for 30-35%. However, the amounts of both are replaced by price changes. Data show that the ratio of cotton blended in May 2011 was significantly reduced from 81.5% to 73.1%, which is an alarming change, indicating that the substitution of chemical fiber and other textile raw materials for cotton has increased.

“At present, in the textile products, the blended products are full of red, but the cotton spinning products are obviously not. When the cotton price is too high, some PTA alternatives can be blended in, and the raw material prices will be controlled,” the industry source told reporters.