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From Shengze index 2010 textile raw materials soaring
In 2010, the domestic textile market remained strong, and the export sector began to show signs of recovery. Shengze’s textile industry gradually emerged from the challenges of the previous two years, showing a steady growth trend. However, this positive momentum was soon challenged by rising costs. The demand for textile raw materials surged, leading to a sharp increase in cotton prices and chemical fiber filament prices, which hit record highs in November. At the same time, the appreciation of the RMB added further pressure on the industry, creating unprecedented cost challenges that were difficult to predict.
The continuous rise in the prices of cotton, cotton yarn, and chemical fibers became a major concern for textile manufacturers. Figures 1 and 2 illustrate the average purchase size of raw materials and the cost trends among small, medium, and large textile enterprises. As shown in Figure 1, the average purchase amount of raw materials by Shengze textile companies increased by 13.34% in January 2010 compared to the end of 2009, driven by inventory building and production planning after the New Year. In February, due to the Spring Festival holiday, business activity slowed down, resulting in a sharp decline of 12.35% in the average purchase amount. From March onward, sales picked up, with the average purchase amount increasing by 7.7% compared to the same period last year.
April saw a dramatic rise in raw material prices, causing a 48.87% increase in the average purchase amount from March. However, in May, the average purchase amount fell by 13.87% compared to the same period in 2009, an unusual drop in the 10-year history of the textile raw material market. By June, the purchase amount rose again by 2.25%, but still showed a 8.2% increase over the previous year. In July, the purchase amount continued to rise, reaching a 5.87% increase compared to the same period in June, though it dropped slightly by 1.96% compared to the same period in 2009.
August brought a significant decline in the average purchase amount of raw materials, falling by 12.81%, mainly due to cautious purchasing strategies as companies waited for price stabilization. In September, the purchase amount rebounded sharply, rising by 16.34% from August. By October, the purchase amount increased by 9.94%, and in November, raw material prices reached their peak, surging by 49.4%. After a year of rapid price increases, downstream fabric and garment processing enterprises could no longer bear the unreasonable costs, leading to a halt in fabric transactions. By December, textile raw material prices finally dropped sharply, returning to a more normal range.
Several factors contributed to the sharp rise in textile raw material prices in 2010. First, the prices of upstream chemical fiber raw materials, such as PTA and MEG, rose alongside international crude oil prices, increasing the cost of chemical fiber filament production. Second, imbalances in the cotton supply and demand chain led to higher prices. Major cotton-producing areas like Xinjiang suffered from climate-related disasters, reducing local production. On the global stage, India, a major cotton exporter, halted foreign cotton exports, worsening the supply-demand gap. Third, the surge in textile demand caused raw material prices to rise. Fabric shortages in Shengze were severe, especially in the first half of the year, when many merchants rushed to secure goods due to concerns about RMB appreciation. This led to increased fabric prices. Finally, speculative hot money played a key role. With the stock market unstable and real estate prices soaring, investors shifted funds into the textile raw materials market, fueling price hikes.
In conclusion, fluctuations in textile raw material prices had a profound impact on the entire textile industry. The consequences of the 2010 price surge included massive order losses for downstream weaving factories, forced shutdowns, and job losses. The cost per garment produced by processing enterprises increased by at least 10 yuan, while wholesale prices of apparel rose by 2 to 4 yuan per piece. This ultimately reduced consumer spending power, slowed garment sales, and affected the upstream production and marketing chains. To maintain stability, all sectors of the textile industry had to implement efficient production and management practices to ensure long-term development. (Silk Network, Huang Xiangning)