From January to April, the industrial added value of textile enterprises above designated size fell by 4.1% year-on-year, with operating income of 1,427.1 billion yuan, a year-on-year decrease of 5.6%; total profits were 33.9 billion yuan, a year-on-year decrease of 31.0%.
Recently, the Ministry of Industry and Information Technology released the performance of the textile industry from January to April 2023. These data attracted the editor’s attention. The profit dropped by 31%, which is a quite large value. It can be seen that life of textile companies this year is more difficult.
During our research, we also felt that the profits of textile companies have dropped seriously this year. Many companies have reported that sales this year have increased by 30% compared with last year, but at the same time, there is a lack of large orders, and most orders are placed in small batches and multiple batches.
NO.1
The owner of a trading company that specializes in outdoor sports fabrics revealed: “The price of fabrics this year has not been rising. If there is a little quantity, customers will lower the price, so the overall profit has dropped by 2-3% compared with last year.”
NO.2
Traders who produce women’s clothing fabrics said that the overall profit this year has decreased by 2/3 compared with last year, a very large decrease, mainly due to high costs and low selling prices.
Various costs are rising and profit margins are shrinking
When it comes to cost, everyone will immediately think of the upstream raw material market. It can be seen from the price chart that polyester prices dropped significantly in the fourth quarter of last year, but entering 2023, polyester prices have returned to high levels. Although the current raw material prices occasionally go down, it can be seen from the price adjustments of polyester factories that the price increase is much higher than the price decrease. Usually the price increase is hundreds of hundreds, and the price decrease is tens of decreases. As the downstream side of the raw material end, the cost pressure of polyester companies will be transferred to weaving companies to a large extent, and the flexibility of gray fabric prices is far less than that of raw material prices. Price drops may occur in a second, but price increases may take several months.
Secondly, the textile industry is a typical labor-intensive industry, with large employee turnover and labor costs increasing year by year. The survey shows that the wages of textile factory workers in the coastal areas of Jiangsu and Zhejiang are concentrated at 7,000-11,000 yuan, and the wages of workers in the central and western regions are roughly around 6,000-10,000 yuan. Many companies say that today’s labor costs have increased from 20% to 30% of total costs a few years ago to 50% to 60%. Although wages continue to rise, the loss of workers in the coastal areas of Jiangsu and Zhejiang is serious, and most migrant workers have returned to their hometowns in the central and western regions. Therefore, it is very difficult for weaving factories in Jiangsu and Zhejiang to recruit skilled workers. The boss had to raise wages and improve various benefits to retain employees, and the cost of wages immediately increased.
Thirdly, after three years of the epidemic, orders have dropped significantly. This year, with the recovery of the economy, demand has begun to pick up. The increase in orders has also become a bargaining chip for fabric buyers to negotiate prices. At the same time, the price of polyester filament, the raw material for polyester, has also risen due to the impact of cost, so the price of gray fabrics is higher than last year. However, buyers have seriously lowered prices and lowered fabric prices, resulting in lower profits for fabric suppliers.
Competition pressure among global textile companies increases
Although the overall sales volume of the textile industry this year has increased compared with last year, some negative factors have not yet been eliminated. Especially in terms of foreign trade, the current recovery in foreign trade orders is not obvious, and there is still a certain amount of pressure. The accelerated recovery of textile supply chains in Southeast Asia, South Asia and other countries has intensified the international competition faced by my country’s textile industry. From January to April, my country’s textile and apparel exports totaled US$92.9 billion, a year-on-year decrease of 2.9%. In April, textile and apparel exports to the world were US$25.7 billion, a year-on-year increase of 9.0%, showing a recovery trend.
Global demand for textiles and clothing increased in April, but my country’s textile and clothing exports declined. This clearly shows that my country’s exports are weak and the “cake” is being divided by more and more countries. Facing the major textile countries with excellent performance in Southeast Asia, one can imagine the pressure on domestic textile companies.
Judging from the actual profits of the company, those with price advantages are often newly developed and high-end custom-woven fabrics. Although the order quantity of developed fabrics is small, the profit is very considerable, while large orders of traditional fabrics are almost unprofitable. Therefore, profit does not lie in the size of the order, but in the added value of the product itself. This is why the industry has always mentioned that companies must increase the added value of their products.
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