Behind the "bright" textile and apparel import and export data: when will the "inflection point" approach under multiple pressures?

On November 7, the latest import and export data were released.
Data from the General Administration of Customs shows that in the first 10 months of this year, my country's total import and export value was 31.67 trillion yuan, a year-on-year increase of 22.2%. Among them, exports were 17.49 trillion yuan, a year-on-year increase of 22.5%. Some media evaluated this data as "surprise arrival".
How about the export performance of the textile and garment industry?
According to the data of the General Administration of Customs: From January to October this year, the national textile and garment export was 256.53 billion US dollars, a year-on-year increase of 6.7% (in RMB terms, a year-on-year decrease of 1.3%). Among them, textile exports were US$117.68 billion, down 9.1% year-on-year (in RMB, down 16% year-on-year); apparel exports were US$138.85 billion, up 25.2% year-on-year (in RMB, up 15.8% year-on-year).

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Obviously, for the textile industry, this surprise comes from the "export of the garment industry".
However, from the perspective of development, the bright data can only represent the "past", and the industry generally pays attention to the prediction of the "inflection point" in the future. Careful people can find from the customs data that the PMI (new export order index) reflecting export expectations has been declining in the second and third quarters of this year, and some institutions predict that the fourth quarter may usher in an "inflection point" for continued export growth.
Rising raw materials, rising logistics costs, and heavy pressure on enterprises
Although there are many surprises in the export data, in fact, foreign trade enterprises are under huge operating pressure while receiving orders.
One of them is the upward pressure from raw materials.

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Chen Jicheng, deputy general manager of the Denim Business Department of Guangzhou Textile Import and Export Group Co., Ltd., said in an interview with reporters: There are indeed many external orders, but sometimes companies dare not take orders, especially when they encounter large orders, the company will be very cautious when signing orders, and needs to be considered comprehensively. Whether the production capacity can keep up, and whether it can guarantee timely delivery of orders. On the other hand, it is necessary to consider many factors such as comprehensive freight rates, rising raw materials, etc., to measure how much profit margins you have.
"Since this year, the prices of upstream raw materials for clothing have been rising, and the prices of raw materials such as cotton, chemical fiber, and petroleum have risen at a relatively high rate." Chen Jicheng said: "Jeans have a kind of raw material called elastic yarn, and women's jeans generally use high elastic yarn. The price per kilogram of elastic yarn has risen 10 times." Chen Jicheng said elastic yarn, which is spandex.
The price increase of raw materials seems to have almost run through the whole year of 2021. From the beginning of the year to the end of the year, from cotton to chemical fiber filament, prices have risen all the way. China's cotton composite price index has fluctuated from 85.82 in April last year to 152.95 in October this year; according to price monitoring, the prices of various products in the domestic polyester filament market hit a new high in the past two years in October, although prices began to start in November. Loose, polyester factories started a big promotion, but the whole year is still a straight upward curve; while the price of fiber raw materials fluctuated and rose, many fabric factories recently received a price increase notice from printing and dyeing enterprises.
Since the implementation of the large-scale power and production limit policy in mid-to-late September, printing and dyeing factories across the country have issued price increase notices one after another, and some manufacturers have even issued many times, constantly raising prices. This has led to the situation that downstream fabric companies are afraid to take orders. A fabric trader complained: "In October, I refused to take orders because of the ridiculously high price of grey grey fabrics and I needed cash to get the goods. In November, because of the continuous increase in the price of dyeing fees, the agreement was negotiated earlier. List, now the production is at a loss, and I will not dare to accept orders in the future. The life in the second half of the year is really difficult!"
Production and processing are under the pressure of rising raw materials, and the pressure from shipping freight in logistics also makes the company "hard to bear."
Although the epidemic is still spreading all over the world, the global supply chain has been affected, and the efficiency of port operations has dropped significantly, but the demand for container transportation has recovered well. According to Clarkson's forecast, global container shipping demand will grow by 6.1% year-on-year in 2021. With the active container transportation market, international freight rates have increased significantly. According to the Drewry World Container Index, the spot price of a 40-foot container from Shanghai to Los Angeles rose to US$10,503 at the end of July, a year-on-year increase of 258%, increasing the cost pressure on textile foreign trade companies and squeezing profits.


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The person in charge of a clothing company in Nantong, Jiangsu told reporters that in the first half of this year, the sea freight price rose sharply, and the container rose from more than 2,000 US dollars to 20,000 US dollars. It has declined since September, but it still reaches $16,000 to $17,000. "Generally, it is necessary to book the cabinet 2 months in advance, otherwise it may not be possible to order, and the price of the cabinet is not based on the price at the time of booking, but according to the market price one week before delivery."
And even if a container is ordered, it is a hassle to be unable to unload it at the port. A person in charge of a foreign trade company pointed out that if a container is stranded at the port, it will be fined $100 on the first day overdue, $200 on the second day, $300 on the third day, and so on. Containers stranded at ports end up paying a very high fine.

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The inflection point of import and export of cost pressure transmission may appear
Undoubtedly, foreign trade companies are now under enormous pressure. Although the demand for orders is still there, enterprises are obviously much more rational in taking orders.
On the other hand, from the perspective of macroeconomic data, although the export data is surprising, the PMI new export order index reflecting export expectations has been declining in the second and third quarters of this year. Of course, this is the overall foreign trade new export order index. Although it does not specifically refer to the textile and garment industry, we can still detect expectations for future export trends.
The leading indicator has declined, but the actual export has maintained a relatively high growth. Does this deviation mean that the inflection point of continuous growth of import and export is coming?
PMI's new export orders are a leading indicator of exports. On the one hand, PMI's new export orders reflect the month-on-month change in exports and are more sensitive to marginal changes in exports. On the other hand, because after signing an order with an overseas company, it needs to be delivered after a period of time, which is included in the new export order, but it will be reflected in the export data after delivery. If PMI's new export orders have slowed down (upward) for 2 to 3 consecutive months, it is necessary to think about whether there is downward (upward) pressure on the export growth rate in the future, and whether there is some logic to support the upward (downward) export of the previous period. Variety.
Huo Jianguo, former director of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, said that the PMI new export order index counts the overseas signing of enterprises, and the customs export data reflects the actual transaction. Therefore, the PMI new export order index usually leads the export growth rate, which plays a certain expected role in future exports.
"The export order index has fallen and the export value has risen. On the one hand, it may be that the price increase of raw materials has led to a passive increase in the price of the company's terminal products, raising the export data. On the other hand, despite the strong external demand, companies are afraid to take large-scale orders and give priority to Digest inventory. This shows that companies are unwilling to expand production capacity and continue to sign orders." Huo Jianguo said.
Tang Jianwei, chief researcher of the Bank of Communications Financial Research Center, said that the main reason for the divergence between the PMI new export order index and the export growth rate is the rise in raw material prices and the continuous rise in freight rates. If the cost pressure of foreign trade enterprises is reduced, the data may return to a normal state. "From the current point of view, this divergence is likely to continue until the end of the year."


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Some reports pointed out that although there is a short-term deviation between the PMI new export order index and the actual performance of exports, in the long run, the trend of the two is still relatively consistent.
That is to say, it is no surprise that the export situation will decline in the fourth quarter, and foreign trade enterprises will also calm down from the hustle and bustle of "cold inside and outside heat".