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Cotton prices soared! Clothing orders decline, foreign trade enterprises are facing “three mountains”, profits are squeezed out!

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Since this year, the U.S. cotton futures prices continue to rise, the U.S. market for cotton T-shirts, denim garments,

and other ready-to-wear products also face pressure to increase prices.

So what is causing the rise in U.S. cotton futures prices? How widespread is the impact?

1.Major cotton exporters production decline, the United States cotton futures prices run high

Drought, hurricanes, and other extreme weather affecting the harvest of the world’s major cotton exporters, driven by this, so far this year, the cumulative increase in U.S. cotton futures prices have been more than 44% and hovering at record highs. In addition, supply chain disruption is also one of the main factors pushing up cotton prices.

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Medium-term futures cotton yarn researcher: the global freight rate is high also makes the whole international freight for cotton transportation, constitute a negative impact. Now the pressure is the cost side of cotton has risen sharply, the pressure on downstream enterprises is relatively large.

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According to a recent report by the U.S. Consumer News and Business Channel, U.S. consumers have felt the impact of cotton price increases. As more than 90% of the raw material of denim clothing is cotton, each pair of jeans needs to use about 1 kilogram of cotton material, the cost of about 20%. To resist the pressure of rising cotton prices, the well-known U.S. jeans brand “Levi’s” manufacturer said that the company has adjusted product pricing in advance. The National Retail Federation also said that the U.S. market cotton T-shirt unit price rose by an average of $1.5 to $2.

2.Cotton costs higher, Chinese apparel companies wholesale orders fell

In the past year, the United States has become China’s most important cotton importer, imports in the total amount of more than 40%. The volatility of the U.S. cotton futures prices, but to a certain extent, some of China’s foreign trade in clothing enterprises face cost pressures.

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Mr. Kwong, who operates a sportswear processing enterprise in Guangdong, told us that the price cost of cotton accounts for 30%-40% of the overall fabric cost of sportswear, which is converted into garments, according to the different cotton content, accounting for about 10%-20% of the total cost of clothing. So cotton prices will certainly squeeze the profits of foreign trade enterprises in clothing.

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However, there is also foreign trade in clothing enterprises that said that cotton only accounts for a portion of the raw materials for clothing, a single species of price increases, the impact on the end consumer price is more limited.

Ltd. Chairman Yang Zhilong: like some cotton spandex, spandex, nylon and so on prices rise at the same time, the entire textile and apparel industry to constitute the pressure of rising raw material costs. If from a single cotton point of view, it is difficult to say that the end consumer price changes.

3.Production plans were forced to be adjusted under the epidemic and costs escalated. Chinese garment exporters face many challenges

The rising cost of raw materials such as cotton is only one of the many challenges facing foreign trade enterprises in clothing. Our company also learned that in the past year, many garment enterprises in labor costs and the pressure on transportation costs have also increased significantly.

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Mr. Cai is the head of a fast-fashion garment processing enterprise in Shenzhen, and his products are mainly exported to the European market. Affected by the recent intensification of the epidemic in Southeast Asia, he opened a factory in Vietnam that had to suspend production, the orders were all transferred to domestic China. Mr. Cai told reporters that although their orders are now more adequate, the cost pressure is also very large.

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Ltd. General Manager Cai Jingting: relatively speaking, the cost increase, staff wages also raised a lot, there is the appreciation of the yuan, the yuan from the beginning to now rose a lot, for foreign trade is a lot of pressure, all things added up, in fact, the cost has increased at least 30%.

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Mr. Cai also said that the disruption of the global supply chain has also affected the apparel industry. In particular, the congestion at the terminals of many ports and the shortage of containers have not only led to a significant increase in transportation costs but also prolonged the transportation cycle, and once they cannot be delivered on time, they face the risk of having their orders canceled.

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General Manager of Guangdong Wanglido Fashion Co., Ltd. Cai Jingting: Because of doing fashion things, the time can not catch up, the color is not right, the season is not right, the customer may cancel the order.

Not only Mr. Cai has such troubles, but many foreign trade enterprises of clothing are also under the pressure of rising transport costs.

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