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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 import and export trade volumes double, but the operational quality and efficiency of the industry also improved significantly. However, despite a notable increase in total exports, the unit price of flax yarn and linen fabrics fell by 11.11%. This drop in prices has been a recurring issue for the industry.
In recent years, the selling prices of flax textiles have remained low. The impact of the 2009 international financial crisis caused a sharp decline in prices. According to data from the China Hemp Industry Association, in September 2007, the price of 15-count flax yarn was 385,000 yuan per ton, which dropped to 362,000 yuan per ton in September 2009—a decrease of 5.6 percentage points on average. Moreover, sales prices of similar products vary widely among enterprises, leading to a long-standing situation of low-level price competition.
As market competition intensifies, this price war is no longer just about squeezing profits—it's about survival. To address this, the China Hemp Industry Association is working to establish a more reasonable pricing mechanism by improving market sales statistics and promoting intra-industry exchanges. They aim to reform the current pricing system and provide companies with market-oriented price references.
Recently, a forum was held in Shanghai where the China Linen Association and Ma Textile Association discussed the initiative to set a sales guidance price for key products. Price adjustments have once again become a hot topic. While some argue that such discussions are pointless and that the market will ultimately decide, others believe that a guide price could help ensure profitability.
Chairman Zhao Zhigang of Beijing Tianye Industry and Trade Co. stated, “Although it’s difficult to set a price, when the topic comes up, everyone talks about it.†Secretary-General Dong Chun-Hsing of the China Linen Industry Association admitted that while the intention behind the guide price is good, there are still many challenges in implementation.
Some companies find it hard to agree on a minimum price, especially when competitors from the south offer lower prices due to better logistics and higher production efficiency. As one CEO put it, “If you can sell at a loss, why not?†In a market-driven economy, achieving a unified price is extremely challenging.
Previously, during the downturn in the flax market, several companies held a summit to establish a minimum price guarantee. However, these agreements lacked real enforcement power and eventually lost their significance. Without binding measures or penalties, such initiatives often fail to make an impact.
Looking ahead, the China Hemp Textile Association emphasizes that a meaningful guide price should be based on accurate market data and internal industry exchanges. If the pricing mechanism becomes recognized by buyers, it could effectively guide the market. The association hopes to strengthen industry self-discipline and promote information sharing to create a more stable and sustainable pricing system.
Despite the challenges, efforts to develop a fair and effective pricing mechanism continue. Whether this initiative can truly help the industry move forward remains to be seen.