After the Spring Festival, the prices of dozens of chemical raw materials soared at up to 1,000 yuan per ton. It includes bisphenol A, n-butanol, neopentylene glycol, and isobutyraldehyde. They all see an increase of more than 50%.
The price of textile products is also closely followed by the strong polyester raw material. Therefore, the continuous rise of polyester filament can reach a state of one price a day. Upstream enterprises demand to cancel the monthly statement method of customers. They prefer to placing orders based on real-time quotations.
On the other hand, downstream enterprises complain about being over stock. They are reluctant to stock up ahead of time, hence, the price increase.
In fact, in the past years, the textile raw material market has increased in price. Cotton, polyester, polyester filament staple fiber, and others experience a wave of small climax.
After the Spring Festival, the growth did not stop. Surge continues.
What caused the price increase?
How long will it last?
This has become the main issue of concern for every textile worker.
Textile raw materials are booming
According to statistics from Shandong Longzhong Information Technology Co., Ltd., as of February 23, many textile raw materials increased by more than 50%. The current price of polyamide 66 slice is 90.81% higher than the low period in 2020. Viscose staple fiber also rose by 85.3% as compared to last year.
On the 7th day since the market opened, the price of polyester filament also continued to rise. Since February 18, its price increases by 100-400 yuan/ton.
By February 23, the price saw an increase of 300-500 yuan/ton. And after a few days, the polyester filament costs nearly 1000 yuan/ton.
However, this soar is nothing compared with spandex. Insiders said that spandex’s daily increase had reached about 5000 yuan. From 28,000 yuan/ton half a year ago to 46,000 yuan/ton now. Indeed, spandex price is sitting on the top of the ladder.
After the Spring Festival, spandex prices continued to rise. Beginning February 15 to February 20, the major spandex manufacturers observed an increase of more than 20%.
Spandex was now up nearly 80% from its record low in August 2020.
Gray cloth prices now recover
In addition to the value of raw materials, many suppliers of gray cloth increased their price.
Due to the impact of the COVID-19 epidemic in 2020, the demand in the end market had shrunk significantly. Likewise, the price of polyester filament has also dropped to the lowest point in history. Therefore, the cost of grey fabric in the textile market has been decreasing. Hence, its price before was too low.
Some companies said that the price of fabrics is generally about 0.1~0.2 yuan/meter. But they also in the range of 1~1.5 yuan/meter.
However, it is worrying that the demand aspect is not the direct driving factor of the fabrics’ price. With the cost of raw materials rising, textile companies are considerably worried about the subsequent price trend.
According to Shandong Longzhong Information Technology Co., Ltd. analyst Lv Qian, “the recent surge in the price of raw materials market is the first reason for the plate affected by the epidemic in 2020.” He added to “expect the rebound under the presence of controlled epidemic.”
“The presence of inflation expectations in 2021” is the second reason. “And the rise in commodity prices driven by the decline in the dollar index.”
Many industry analysts think crude oil has something to do with the rise of raw materials.
Oil prices soared during the Lunar New Year holiday. After an unprecedented cold snap in the Arctic on February 15, it sent temperatures plummeting across much of the United States. This fact drove energy markets into turmoil.
Dallas, Houston, and other cities suffered rotational blackouts. As the demand for heating grows, the power grid stretches to its limit. In Midland, Texas, subzero temperatures have knocked 1 million barrels a day off U.S. shale gas production. It also pushed oil prices to a nearly 13-month high, above $60 a barrel. The cold weather could also spark a race for fuels. With heating oil expectations to go up more than 2%, natural gas is up more than 3%.
However, some experts said the rise of textile materials after the holiday was supplemented by the surge of crude oil. Once the cold wave in the United States eventually passes, there will be no reason for the price to jump.
When textile raw materials are difficult to produce, it will sustain a driving effect. Raw material prices will eventually recover.
The growth of the cotton market
Some people in the industry also said that the rise of crude oil could not fully explain the raw material market’s volatility. Because not only do the chemical fiber products rise, the cotton market also grew across the board.
Zheng cotton CF105 reported a settlement price of 15,135 yuan, up by 230 yuan on February 4. On February 5, it went up by 355 yuan again. The growing situation for two consecutive days has exceeded 500 yuan. And the price approached a new high level.
Recently, backed by good news, Zheng cotton prices have risen to the highest value after many additional positions in recent years. For the cotton price growth, analysts predict cotton supply and demand relationship is more solid.
According to the just-released ICAC report, there was a 9% reduction in global cotton production. With this, expect a 9.3 million tons increase in the worldwide cotton trade.
Several previous USDA global cotton supply and demand reports suggest a continued reduction in the cotton output and stocks.
There was also an advantage to the improving global supply and demand pattern. The news that the U.S. will suspend additional tariffs on nearly $370bn of Chinese goods boosted confidence among domestic players.
The introduction of the national “Fourteen Five” policy means a stable planting and supply of heavy cotton seed. A large-scale point of view means the country highlights the importance of cotton. Without expecting any substantial increase or decrease, cotton planting will remain steady.
Under the premise of gradually increasing demand, China’s cotton supply remains consistent.
Prices of synthetic fibers, a cotton alternative, competes with cotton. Hence, the price increase seems justified.
What is the next trend?
Indeed, one of the key reasons why commodity markets have been flourishing is that the global economy shows signs of improvement. Market expectations are growing. U.S. and China support the global economic recovery in 2021, driven by optimism over the COVID-19 vaccination.
A Reuters poll showed a majority of economists were more confident about the U.S. economic recovery. A result of the $1.9 trillion rescue plan put together by the Biden administration.
Economists expect the economy to grow 4.7% this year and 3.5% next year, up from 4.0% and 3.3%, respectively.
Simultaneously, China’s robust economy has been an important factor in supporting base metals and energy stocks’ prices.
Because of China’s economic outlook in 2021, the International Monetary Fund (IMF) predicts that China might achieve 8.1 percent growth this year.
They view it as a key factor for stock markets.
Supply and demand are other major aspects for understanding the rally.
In terms of the oil market, which is closely related to the textile industry, the IEA said in its February Market Report that global supply and demand would continue to be stable after the COVID-19 outbreak in 2020.
What’s in store?
The International Energy Agency raised its forecast for global oil production to 830,000 b/d. From 540,000 b/d previous expectations from key producers such as the Organization of Petroleum Exporting Countries and Russia.
At the same time, global oil demand was 96.4 million b/d, down 200,000 b/d from previous estimates.
Although the IEA raised its production forecasts and lowered its demand forecast, it still believes in an improving global economy. This will accelerate the decline in global oil inventories.
This means that demand for crude oil will outpace rising production in the second half of this year. And the excess stocks built up since the outbreak will be rapidly reduced.
With the global economic situation and China’s macro policy level combined, how to view the rising trend of textile raw materials?
Shandong Lung and the information technology co., LTD., said analysts Lv Qian gave a positive outlook in inflationary effects. The textile raw materials market is emerging from a rapid increase. As the weaving section is not centralized, return to work is hopeful. The market has a certain weaving inventory, not in circulation. Limitations after the fifteenth day of the first order flow, printing, and dyeing orders increase may drive the textile raw material prices to continue to rise.
But if the stock does not catch up with the bustling raw materials market, subsequent quotations may be temporarily stabilized. With time adjustment between 4 and 5 months, the developed countries such as America and Britain, the inflation, economic, and stock level, may have a narrow adjustment or may increase once more.