Operating rates return to high levels: How's the textile Business, good or bad?

According to CCFGroup statistics, as of this Thursday, the operating rates of weaving and dyeing mills in Jiangsu and Zhejiang have recovered to 82% and 87%, respectively, reaching relatively high levels. The weaving mills operation rate is even higher than the same period last year.

So how is the actual business downstream? Our team visited some downstream textile bases recently.

Firstly, let's look at the domestic sales

Currently, the best-performing products observed are the new Chinese-style fabrics and clothing, which belong to niche markets within niche products. Initially, it started with the production of horse-face pleated skirts in jacquard loom in Haining and later extended to various other places producing various new Chinese-style fabrics using jet and air-jet jacquard machines. Overall, the orders have been booming, with long order lead times, high prices, and relatively generous profits.

Additionally, there are some mass-market products that are performing relatively well, but not exceptionally. For example, the single-sided knitting machines in Shaoxing mainly produce summer fabrics and are currently busy during the peak season of the year. Moreover, taffta produced by water-jet weaving loom in Wujiang are also performing well. This may be related to the government's requirement to phase out some machines at the end of last year. Furthermore, the water-jet weaving loom in Changxing for home textiles, especially for double-jet elastic fabrics are in short supply. The grey fabric inventory reduced obviously.

However, it is still felt by a considerable portion of downstream players that the level of busyness in domestic sales after the start of the year is weaker than the same period last year. For example, some regular seasonal products produced by single-sided knitting machines in Shaoxing, warp knitting machines in Haining and water-jet weaving loom in Wujiang are weaker than last year.

According to our analysis, in 2023, the epidemic before the Spring Festival led to relatively fewer pre-holiday stocks of spring and summer fabrics and clothing. As a result, after the holiday, the entire market rushed to place orders and urge production to catch up on progress. Some fabric traders also stocked up on spring and summer fabrics to occupy dyeing mill capacity, making weaving and dyeing mills even busier. Of course, the domestic sales performance last year was indeed good, so the stocks of various sectors were well absorbed.

In 2024, the winter fabric and clothing sales were good, especially before the Chinese New Year, and there were expectations for demand after the holidays. Additionally, the gradual increase in upstream raw material prices also made downstream stocking relatively sufficient. However, due to the significant drop in temperature after the holidays, the sales of spring clothing have been delayed, seriously affecting the atmosphere in the domestic sales market. As a result, market sentiment has turned cautious. Although fabric traders have relatively few stocks, they are not eager to stock up at this time.

This trend is also evident from the perspective of dyeing mills. Although dyeing mills have reached the same operating level as the same period last year, they are not as busy. The increase in dyeing fees is only for woven products, while stable for knitted products.

Next, let's look at the performance of the exports.

Although there may be differences among individual companies, the overall trend is improving, but temporarily not as high as market expectations. Compared to last year, inquiries and orders for from export market have increased before and after the Chinese New Year this year, but the overall volume of orders is not large. Some orders for the Islamic holy month of Ramadan were placed before the Chinese New Year. After entering Ramadan in March, the number of orders decreased. Therefore, it is estimated that a considerable number of foreign trade companies' businesses after the Chinese New Year will be generally weak or relatively low, and it is expected to wait until after the end of Ramadan in April to recover.

Some customers in Europe and the United States have increased their inquiries. For example, the order volume for fleece products of circular knitting mills in Changshu is relatively good. The foreign business of water-jet weaving loom for home textiles is also relatively good in Wujiang. Some circular knitting companies in Shaoxing have also reported that foreign orders are relatively sufficient, and the fabrics are finally made into autumn and winter clothing and shipped to Europe and the United States.

However, many overseas customers are requesting order transfers, and some customers have explicitly required Chinese companies to build factories overseas to continue cooperation, especially for cotton textile orders.

Overall, the current downstream terminal market business shows significant differentiation, with some thriving while others struggle. In terms of domestic sales, although there are products performing well, the overall atmosphere is not as good as the same period last year, mainly due to pre-ordering, sluggish sales of spring clothing, and cautious stocking by traders after the Chinese New Year. In contrast, there are signs of improvement in the export market. Meanwhile, downstream knitting and weaving mills have sufficient raw material inventory and some post-Chinese New Year orders, with production levels returning to or even exceeding the high levels of the same period last year.