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Whether the guide price can avoid the lowest limit price - Discussion on the strategy of raising linen products
The global economy is showing signs of recovery, and the linen textile industry in our country is beginning to feel the positive effects. In the first quarter of this year, the overall performance of the hemp-spun yarn sector was encouraging. During the first two months of the year, not only did the volume of import and export trade double, but the quality and efficiency of operations also improved significantly. However, despite a noticeable increase in total exports, the unit price of flax yarn and linen fabrics dropped by 11.11%. This price decline has become a recurring issue.
Over recent years, the selling prices of flax textiles have remained low. The impact of the 2009 financial crisis caused a sharp drop in prices. According to data from the China Hemp Industry Association, the price of 15-count flax yarn was 385,000 yuan per ton in September 2007, dropping to 362,000 yuan per ton in September 2009—a decrease of 5.6 percentage points. Moreover, sales prices for similar products vary widely among companies, with many operating in a low-price competitive environment.
In today’s fiercely competitive market, price competition is no longer just about squeezing profits—it's about survival. To address this, the China Hemp Industry Association aims to establish a more reasonable pricing mechanism by improving market sales statistics and intra-industry exchanges. They want to replace the current pricing system and provide enterprises with market-oriented price references.
Recently, a linen business forum was held in Shanghai, where the China Ma Textile Association and others discussed the establishment of a guidance price for main products. Price increases have once again become a topic of discussion. While setting minimum prices is not a new idea, it may not be the last attempt. As one industry leader put it, “Discussions are useful, but ultimately, the market decides.â€
Zhao Zhigang, chairman of Beijing Tianye Industry and Trade Co., Ltd., noted that while many companies find it difficult to set price guidelines, discussions on pricing are inevitable. “Our goal is to set a guide price to ensure profits and expect strong support from enterprises,†said Dong Chunxing, Secretary-General of the China Linen Industry Association. However, during meetings, the focus often shifts to the lowest possible price.
Some companies set prices too low, especially those in the south with lower transportation costs and higher production efficiency. As one flax company CEO explained, “If they can sell at a loss, why shouldn’t we? It’s hard to operate in a free-market environment where everyone sets their own prices.â€
In the past, during a downturn in the flax market, companies held summits to agree on minimum price guarantees. These agreements were formal, but in practice, they had little real impact. After several iterations, it became clear that such measures lacked enforceability, leading to their eventual abandonment.
Now, the China Hemp Textile Association is working on establishing a more meaningful guidance price. According to Xu Jixiang, the guidance should be based on market sales data and internal trade exchanges, providing a reference for enterprises. If the price becomes recognized by buyers, it could help guide the market effectively.
The proposal emphasizes that the industry is gradually recovering from the financial crisis, with increased orders and better production conditions. Companies aim to improve profitability while managing rising costs related to energy, environmental protection, labor, and exchange rates. The association hopes to strengthen self-discipline through information sharing and negotiations to create a more reasonable pricing system.
Despite the challenges, the goal remains clear: to guide the industry toward sustainable and stable development. Whether this initiative will succeed in raising prices and helping companies out of their current difficulties remains to be seen. For now, the work on formulating these guiding prices is ongoing, and the outcome is still uncertain.