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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, experiencing a steady growth phase. However, this period also brought unexpected difficulties. The demand for textile raw materials surged, leading to a sharp increase in cotton prices and chemical fiber filament costs, which reached record highs in November. At the same time, the appreciation of the RMB added to the cost pressures faced by the entire industry, creating significant challenges for textile enterprises.
The continuous rise in cotton, yarn, and chemical fiber prices became a major concern for the industry. As shown in Figure 1, the average purchase size of raw materials by Shengze textile companies increased significantly at the beginning of the year. In January, the average purchase amount rose by 13.34% compared to the end of 2009, driven by enterprise stockpiling and production planning. However, February saw a drop due to the Spring Festival holiday, with purchases declining by 12.35%. From March onward, the market picked up, with a 7.7% increase in raw material purchases compared to the same period last year.
April witnessed a dramatic jump of 48.87% as raw material prices continued to climb. May, however, saw a sudden decline of 13.87% compared to the previous year, an unusual trend in the 10-year history of the textile market. By June, the purchase amount rebounded slightly, rising by 2.25% and 8.2% over the same period. In July, the purchase volume increased by 5.87% compared to the same period in 2009, but dipped by 1.96% compared to the previous month. August saw a notable drop of 12.81%, mainly due to cautious purchasing strategies amid rising prices.
September marked a recovery, with a 16.34% increase in purchases compared to August. October saw a further rise of 9.94%, and by November, raw material prices hit a peak, surging by 49.4%. After a year of rapid price increases, downstream fabric and garment processing companies could no longer bear the high 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 surge in raw material prices. First, the rising cost of chemical fiber raw materials such as PTA and MEG, driven by increasing crude oil prices, led to higher production costs. Second, supply and demand imbalances in the cotton market played a key role. Droughts in Xinjiang and India’s decision to stop exporting cotton disrupted the global supply chain, causing prices to skyrocket. Third, the growing demand for textiles led to a shortage of fabrics in Shengze, especially in the first half of the year, when merchants rushed to secure orders ahead of RMB appreciation. Finally, speculative hot money from the stock and real estate markets entered the textile raw materials market, fueling price inflation.
These price hikes had serious consequences. Downstream weaving factories faced massive order losses, some were forced to shut down, and workers lost their jobs. Garment processing companies saw their per-unit costs increase by at least 10 yuan, pushing up wholesale prices by 2 to 4 yuan per piece. This ultimately reduced consumer spending power and slowed sales, affecting the entire textile supply chain. To maintain stability, all sectors of the industry needed to work together to ensure sustainable development. (By Huang Xiangning, Silk Network)