Since the outbreak of the Russia-Ukraine conflict in 2022, this ongoing war has, like a butterfly effect, profoundly disrupted the global economic landscape, and its impact on China's textile industry has been multi-faceted and far-reaching. On the one hand, after European enterprises withdrew from the Russian market, Chinese textiles quickly filled the gap with their excellent quality and cost-effectiveness, and the export volume to Russia soared all the way. On the other hand, the Russia-Ukraine conflict has seriously threatened the global crude oil supply. International oil prices have fluctuated like a roller coaster, which in turn has affected the prices of upstream products in the textile industry chain such as polyester raw materials.
The situation between Russia and Ukraine has escalated again, causing severe market fluctuations
Recently, the situation between Russia and Ukraine has once again fallen into a tense vortex. According to CCTV News, Ukraine announced that it would launch a special operation on June 1st, sending drones to destroy 41 Russian strategic bombers. The drones also reached over 4,000 kilometers of Russian territory and simultaneously attacked four strategic bomber bases of the Russian Aerospace Forces. If this news is true, its scale and impact, as a Russian military blogger put it, are comparable to the "Russian Pearl Harbor Incident". Although Russian media denied this, the market has already responded in advance. Brent crude oil and WTI crude oil prices both soared by approximately 4%, the spot price of gold rose by more than 2.5%, and the spot price of silver increased by more than 4%. The risk aversion sentiment spread rapidly in the financial market, also raising concerns about the subsequent development of the situation.
In the polyester raw material market, production cuts have driven up prices
In the polyester raw material market of China's textile industry, it is currently in a production reduction cycle of polyester filament. A month ago, the leading enterprise in the industry announced that it would increase the intensity of production cuts. The second round of production cuts increased by approximately 8%, and at the same time, it began to repair the prices of some loss-making filament varieties. Driven by this, some polyester factories have raised the prices of their products before the festival. In addition, the combination of multiple factors such as production cuts and promotions has effectively alleviated the inventory pressure on leading polyester factories in the short term. Looking back at the same period last year, before the off-season arrived, polyester factories broke the norm and sold polyester filament with a "fixed price" strategy, driving up the price against the trend. Nowadays, due to geopolitical factors, the upstream crude oil prices have risen sharply, and polyester factories seem to have the confidence to raise prices again.
Weaving enterprises are in a predicament and unable to afford high-priced raw materials
However, the downstream weaving enterprises in the textile industry chain are facing a completely different situation. In the first half of last year, the market for grey cloth was once booming. Despite the meager profits of weaving enterprises, they managed to significantly reduce the inventory of grey cloth and improve their financial situation by adopting the strategy of selling at low margins but high volumes. Some enterprises even took the opportunity to update their equipment and expand production capacity. However, the situation has taken a sharp turn for the worse this year. Even though profits remain sluggish, the addition of new equipment has become a burden. A large amount of raw fabric has been piled up and occupied funds, and enterprises are no longer able to afford the high prices of raw materials.
The demand for foreign trade is under pressure and the imbalance between supply and demand in the market has intensified
Meanwhile, against the backdrop of continuously increasing production capacity, the US tariff policy and restrictions on cross-border e-commerce in many overseas countries have severely suppressed the growth of foreign trade demand, leading to an intensification of the imbalance in market supply and demand, and further squeezing the profit margin of conventional grey cloth. Considering the complex situation of the upstream and downstream, although the upstream polyester factories have a strong willingness to raise prices, with the downstream weaving enterprises unable to take over, the polyester raw material market is unlikely to repeat the "fixed price" situation of last year. The chain reaction triggered by the Russia-Ukraine conflict is still continuously testing the resilience and adaptability of China's textile industry. The future market trend still requires continuous attention to the changes in the situation and the dynamic adjustments of each link in the industrial chain.
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