Soaring cotton prices have forced Chinese garment makers to face two attacks

Soaring cotton prices have made domestic garment manufacturers unprecedentedly sad.

The clothing manufacturing enterprises in the middle part of the industrial chain were caught in a “double-sided pressure” situation in the current cotton price turmoil: On the one hand, the upward pressure on prices of fabrics in the upper reaches kept rising, and on the other hand, they faced a strong situation. The brand dealers have very limited bargaining power.

In fact, the profits of apparel manufacturers are not very generous. In recent years, under the combined influence of factors such as the increase in raw materials, labor costs, and the pressure of *** appreciation, companies have been under tremendous pressure to survive. The crazy rise in cotton prices is more like a fatal blow, causing many garment manufacturers to fall into business difficulties.

Unprecedented cost pressures The company's hard-witted cotton prices The direct impact of rising cotton prices on companies is the rapid rise in costs and a drop in profits. "In the clothing industry, this line has been fought for more than 20 years. This year is the most stressful year. Conservatively, this year's profit will also be less than half." Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd. engaged in production of export orders Depressed heart.

Liu Bisheng, chairman of Foshan Antonny Knitting Co., Ltd., used a word to describe the current situation of the company—“bitter”. He said frankly that the rise in cotton prices has left their company at a critical point of not making money and losing money. If the price of cotton continues to rise, it will surely lose money.

Since garment manufacturers generally receive orders before arranging production and purchasing raw materials, they do not expect to accumulate too many fabrics in advance. Therefore, the increase in fabric prices brought about by the increase in cotton prices will actually pressure manufacturers. In the period when cotton prices are frequently raised, manufacturing companies must purchase fabrics in time after receiving orders, and they may have to bear the losses caused by price changes.

Cai Jinhui, business manager of Putian Clothing Co., Ltd. of Fujian Province, said that one day's price of cotton yarn does bring great confusion to the production companies. In the course of the interview, he immediately called a large-scale cotton spinning textile company in China to inquire about the latest price of cotton yarn. The quotation of the other party stated that every kilogram of cotton yarn has risen by 5 yuan more than the previous few days.

"Once the customer orders, we have to book the yarn immediately, cash advances raw materials, or else it has gone up. This can guarantee the stability of the order cost, but the financial pressure is too great." Cai Jinhui sighed.

It is understood that in the overall cost of apparel processing enterprises, the cost of raw materials based on fabrics accounted for about 70% of the proportion. In other words, the cost of 70% of cotton-based garment manufacturing companies has risen sharply in recent years. In addition to cotton yarn, the prices of synthetic fabrics such as polyester and acrylic fibers have also increased in varying degrees. In addition, the continuous increase in the cost of labor has also brought a lot of pressure on the company.

“In the past, the wage of a worker was less than 2,000 yuan, and now the average wage is more than 2,600.” Liu Bisheng stated that the increase in labor costs is also a great pressure on processing companies, which accounts for about 15% of the total cost.

According to Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., the increase in labor costs is even greater than the rise in cotton prices. Because the rise in cotton prices may only be a problem in the recent period, rising wages of workers are problems that need to be faced in the long term.

Upstream price pressures continue to pass down, but garment processing companies can not continue to pass this pressure to downstream brands and buyers.

According to Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., their company's products are mainly exported to Japan, and the price range that purchasers can accept is very limited. For example, the use of low-grade fabrics of clothing, fabric prices up 10% upstream, clothing prices can only rise about 3%; the use of high-grade fabrics is slightly better, the price increase rate can reach about 5%.

According to Liu Bisheng, chairman of Foshan Antony Knitting Co., Ltd., it is difficult for them to raise prices to downstream brands. For example, a mercerized cotton T-shirt worth 112 yuan last year, this year's clothing of the same grade will be able to increase the price to 120 yuan, or increase. Far less than the increase in raw materials.

According to Liu Bisheng, garment processing companies are the most passive part of this cotton price increase, and they are the hardest hit. “On the one hand, upstream fabric companies will pass upward pressure and cannot avoid them; on the other hand, brand companies are reluctant to bear more cost pressures. We have become a layer in the cracks. No way, bargaining power is too low. This is Business game." Liu Bisheng sighed.

Cai Jinhui, business manager of Fujian Puster Garments Co., Ltd. also frankly stated that due to the long-term cooperation relationship between friendly and mutual help, the brand companies will consider accepting requests for adjustments in finished apparel prices when the raw materials rise; but Orders from abroad are more difficult to raise prices.

With so much pressure, garment manufacturing companies are struggling. Some small processing companies can only close down without profit.

According to Zhu Danying's estimate, about one-third of small businesses in Dalian have closed down. In the past, they received orders from foreign countries that were to be distributed to local small businesses. However, this year, few small businesses have come to pick up their orders.

"After all, small businesses have lower risk resistance. If they don't have enough money, they will close or switch to other industries. Larger companies like us can still hold on, but if the cost continues to rise, it will be difficult. Hold on," said Zhu Danying.

According to Liu Bisheng, there are also some small garment processing factories in Guangdong.

Contrary to the ever-increasing operating pressure, business is exceptionally good.

"A lot of orders came to us this time. But because of price increases, we didn't dare to pick more." Liu Bisheng said, "Now it's not very profitable. If the cost goes up, it's too late to say that we don't even say it for a year." It may also lose money, so it can only selectively pick up some old customers' orders."

Zhu Danying also stated that although it is easier to accept orders, due to cost pressures, they are also more cautious in taking orders, and it is expected that there will be a large drop in the number of orders received throughout the year.

Countermeasures: Multiple measures to resolve cost pressures In response to the mad increase in raw materials such as cotton prices, companies have taken some measures to deal with them.

First, to integrate textiles and textile materials, it is recommended that customers who place orders not use cotton components, or reduce the content of cotton components, or use viscose and other relatively stable textile materials to achieve relatively stable production and operating conditions.

Second, the use of high-grade cotton yarn to increase the added value of cotton clothing, avoid or reduce the obvious impact caused by rising cotton prices.

Third, use a lot of funds to store reasonable sources of supply.

Fourthly, multi-channel cotton yarns are used as raw materials. In addition to the major yarns, the yarns from small factories can be used to make up for the difference and financial pressure.

Fifth, improve the technical content of products, enhance the level of production management, strengthen order management, consider the factors that affect the price of materials, and further control the impact of rising raw materials.

Increasing value-added is a fundamental additional value and does not only belong to brand enterprises. Processing companies can also pursue added value.

In the ups and downs of this cotton price, many garment manufacturers fully realized that only by continuously increasing the value-added of their own manufacturing brands can they enhance their bargaining power and enhance their anti-risk capabilities.

Zhu Danying, general manager of Dalian Huaying Garment Co., Ltd., said that for a long time, “Made in China” has become a sign of “low price”. Now is the time to break this idea.

Jiang Hengjie, an advisor of the China Garment Association, believes that this increase in cotton prices has brought great pains to the entire garment industry, but it may not be a bad thing because it will force companies to innovate, increase production efficiency, and increase brand value.