The international environment remains complex and severe, with global economic growth slowing down, inflation still at a high level, ongoing geopolitical conflicts, and increased volatility in the financial markets in April 2023.
The triple pressures of shrinking domestic demand, supply shocks, and weakening expectations have eased to some extent, and market demand is gradually recovering, indicating a positive trend in economic development. Looking at specific industries, corporate production has slowed down, and there is no significant improvement in the foreign trade market. There is intense competition in the domestic market, and inventory of some products is beginning to accumulate, leading to increased operational pressure for businesses. As a result, they are adopting a cautious and wait-and-see attitude towards the future.
In April, the China Cotton Textile Business Activity Index was 49.3, a decrease of 1.5 compared to March, falling below the threshold and indicating a decline in industry activity. Looking at the sub-indices, among the seven sub-indices that constitute the China Cotton Textile Business Activity Index, the indices for raw material purchases, raw material inventory, production, product sales, product inventory, business operations, and business confidence were all below the boom-bust line.
Raw Material Purchasing Index
In April, the raw material purchasing index was 49.3, a decrease of 2.3 compared to March, falling below the boom-bust line. In terms of raw material market prices, cotton prices experienced fluctuation and a slight increase, while polyester staple fiber prices showed a small rise due to the increase in crude oil prices, and viscose staple fiber prices remained relatively stable with a slight decline. Regarding specific data, the average monthly spot price of domestic Grade 3128 cotton was 15,176 yuan/ton, showing a month-on-month increase of 459 yuan/ton, or 3.12%. The average monthly price of 1.4D direct-spun polyester staple fiber was 7,521 yuan/ton, with a month-on-month increase of 204 yuan/ton, or 2.79%. The average monthly price of mainstream viscose fibers was 12,996 yuan/ton, showing a month-on-month decrease of 59 yuan/ton, or 0.45%. The fluctuation in raw material prices during the month was significant, leading cotton textile companies to adopt a cautious and wait-and-see approach. The enthusiasm for raw material procurement was not high, resulting in an overall decrease in purchasing volume compared to March.
Raw Material Inventory Index
In April, the raw material inventory index was 49.1, a decrease of 0.6 compared to March, continuing the downward trend. During the month, upstream raw material supply was sufficient, but the downstream market conditions were relatively sluggish. Coupled with the increase in cotton prices, cotton textile companies reduced their raw material inventory to lower financial risks. Looking at the sub-indices, the cotton inventory index was 48.9, a decrease of 1.6 compared to March, while the non-cotton fiber inventory index was 49.3, an increase of 0.3 compared to March. It can be observed that the inventory level of cotton in companies continued to decline.
Production Index
In April, the production index was 49.4, a decrease of 2.1 compared to March, falling below the boom-bust line. Signs of a weakening market emerged after the Qingming Festival, leading to a slowdown in production and a decline in yarn fabric output. Overall, spinning mills performed better in terms of equipment utilization compared to weaving mills. Looking at the sub-indices, the equipment utilization index for cotton textile enterprises was 50.0, indicating expansion. The yarn production index was 49.2, a decrease of 4.3 compared to March, while the fabric production index was 48.4, also a decrease of 4.3 compared to March.
Product Sales Index
In April, the product sales index was 49.0, a decrease of 2.0 compared to March, falling below the boom-bust line. Despite the relatively strong and volatile cotton prices upstream, downstream demand was weak, resulting in a downward adjustment of yarn and fabric prices. During the month, the average monthly price of 32-count pure cotton carded yarn was 22,467 yuan/ton, a decrease of 377 yuan/ton or 1.65% compared to the previous month. The average monthly price of pure cotton greige fabric (3232 13070 2/1 47" twill) was 4.74 yuan/meter, a decrease of 0.01 yuan/meter or 0.21% compared to the previous month. In terms of market sales, terminal orders fell short of expectations, and with the end of the peak season approaching as the "Golden Week" ends, there may be difficulties in securing future orders. In April, the yarn sales volume index was 49.0, a decrease of 3.1 compared to March, while the fabric sales volume index was 48.5, also a decrease of 3.1 compared to March.
Product Inventory Index
In April, the product inventory index was 49.8, unchanged from March, indicating no significant improvement in inventory levels. As previous orders were gradually fulfilled, cotton textile companies slowed down shipments, leading to an increase in yarn and fabric product inventory. Overall, weaving mills had better inventory levels compared to spinning mills. Looking at the sub-indices that constitute the product inventory index, the yarn inventory index was 49.7, a decrease of 0.3 compared to March, while the fabric inventory index was 50.0, an increase of 0.5 compared to March, indicating that greige fabric inventory remained at a favorable level.
Business Operation Index
In April, the business operation index was 49.5, a decrease of 1.9 compared to March, indicating a less favorable business environment below the boom-bust line. During the month, export orders remained weak, competition in the domestic market intensified, and the increase in upstream raw material prices did not drive up downstream product prices. Companies maintained a slim profit margin and faced continued operational pressure. Looking at the sub-indices that constitute the business operation index, the main business revenue index was 49.0, a decrease of 3.0 compared to March, while the total profit index was 49.0, a decrease of 0.8 compared to March.
Business Confidence Index
In April, the business confidence index was 48.6, a decrease of 0.1 compared to March, below the boom-bust line. Currently, the risks facing the global economy are increasing, external pressures are growing, and the recovery of the textile foreign trade market still requires time. While the domestic economy is in a recovery stage with significant development potential in the domestic market, competition is fierce. Approaching the traditional off-season for the textile industry, cotton textile companies are cautious and adopt a wait-and-see approach towards future developments, indicating a slight lack of overall confidence.
The China Cotton Textile Industry Prosperity Index is collected from nearly 500 cotton textile companies nationwide and is calculated by weighting multiple key indicators. A value above 50 indicates that the prosperity level of the cotton textile industry in the current month is better than the previous month, while a value below 50 indicates a decline in prosperity compared to the previous month.
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