With strong cold air approaching, will there be a final improvement in textile orders?

Currently, a powerful cold air mass is affecting China, bringing temperatures down as far south as South China. Regions in Northeast China, North China, the Yellow River Basin and South China will see continuous temperature declines, with many areas in the central and eastern regions likely to hit new lows for the past six months. Meanwhile, there will be widespread precipitation in the central and eastern regions, though the intensity will generally be low, with some areas in Gansu, Ningxia, Shaanxi, and Shanxi possibly experiencing rain-snow transitions.

In early-November, downstream businesses continued to weaken, leading to a slight accumulation of grey fabric inventory. In some regions, downstream plants began to lower their operating rates to manage inventory while showing low sentiment towards speculative replenishment of raw materials. Even when stock are at a low point, replenishment is limited to just meeting essential needs, with some opting for moderate production cuts. This is partly due to a pessimistic outlook on future raw material prices and a gradually diminishing expectation for upcoming orders.

According to the data of CCFGroup, the operating rate of fabric mills has reduced to 78% last week, down by three percentage points over last week. The reduction speed of downstream operating rate should be highly noted.

Looking at the weather forecast, a nationwide drop in temperatures is expected in late-November, raising concerns about whether this will provide a boost to downstream businesses, particularly for thermal fabric products. If so, there may be a short-term rebound in domestic demand, potentially slowing the rate of production cuts. Referring to last year's situation (as shown in the downstream order index), there was a noticeable rebound in downstream business after the weather turned cold in late-November. However, last year was the first year after the pandemic, and domestic demand performed well throughout the year. This year, domestic demand is relatively weak, so whether there will be a rebound in downstream business and the strength of that rebound remain to be seen.

If the cold weather does not sufficiently stimulate demand, the weakening trend in late-November may accelerate. Currently, some downstream companies have reported that if there is still no improvement by late-November, the proportion of production cuts at the end of November or early-December may increase. Therefore, late-November is a critical period for the textile industry.