The “worries” of the recovery of foreign trade!

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release date:2021.03.05        11:00

The world has been affected by the epidemic and the economy is sluggish. In this regard, the strong domestic supply chain shows a distinct advantage. In the second half of the year, orders for some products have been transferred to my country, which has also brought about “explosive orders” in foreign trade exports in several industries, including the textile industry.

However, since the second half of the year, the prices of raw materials have risen sharply, ocean freight has risen unprecedentedly, and the exchange rate of RMB has remained strong, putting many domestic foreign trade companies in an embarrassing situation of “pressure on both sides”.

textile industry
1. Orders surged in the second half of the year but could not make up for the loss in the first half of the year

China’s textile exports performed well before November 2020. The year-on-year growth rate of exports in April has turned positive. The monthly export volume in May exceeded US$20 billion, a year-on-year increase of 77.3%.
“The current orders received have been scheduled until March 2021, which is rare in history. Generally, orders for home textile products such as towels will be scheduled for about one month to one and a half months.” said Yu Conghai, director and deputy general manager of the Vosges Group

The Vosges Group is China’s largest exporter of home textiles. It mainly exports home textile products such as towels and bedding. The export accounted for 80%-85%, and the sales in the American market reached 270 million to 280 million US dollars.
According to reports, the export value of the American market has increased significantly from the second half of 2020 year-on-year, about 15% per month. In normal years, the peak period of foreign trade orders is from October to March of the following year. In previous years, the Vosges Group’s beach towel orders will increase during this period, and the goods will be stocked for the next summer. With the increase of orders in the American market in the second half of 2020, the structure of export products has also undergone some changes, and orders for household and indoor products have increased significantly. “The overall performance of home textile products is good.” Yu Conghai said.

In addition to home textile products, export orders for fabrics have also surged. A quarter of the world’s fabrics are traded in Keqiao, Shaoxing every year. The foreign trade prosperity index in the Keqiao Textile Index released locally shows that in November 2020, it increased by 10.4% year-on-year to 911.77 points, the highest value since 2019.
The person in charge of a trading company stated that 90% of its products are exported to the American market. “Since August, the monthly export value has increased compared with the same period last year. Through the four months of growth from August to November, To make up for the previous losses, the increase in exports in some months even exceeded 50%.”
This seems to be the consensus of many textile companies interviewed. Although foreign trade orders surged in the second half of the year, it was still difficult to make up for the losses in the first half of the year. The data provided by the Keqiao District Bureau of Commerce also shows that even after the third quarter of order growth, from January to October 2020, the cumulative export value of enterprises in the district has dropped by more than 20%.
“Even if there was retaliatory growth in the second half of the year, it did not make up for the export share lost in the first half of the year. Especially in the second quarter, the year-on-year decline was large.” Yu Conghai said.

2. Sea freight + exchange rate, the more you export, the more you lose

A person in charge of the logistics department of a home textile company recalled that shipping costs to the United States began to rise slowly from September 2020, probably when the return orders increased. “It used to be more than US$2,000 per container to the US, but now it has risen to more than US$6,000. And it will continue to rise.”
Behind the increase in shipping costs is the tight supply of containers. “Before, even if the price increased, containers could still be found, but starting from the end of November 2020, even the containers were difficult to grab. Even if the space was booked very early, it was discovered that there were no containers when loading the containers, resulting in a backlog of goods in the warehouse.”

“Because of the inability to ship in time, the value of the products affected by the company currently reaches three to five million US dollars.”
But when it comes to the impact of rising shipping prices on textile exports, a person in charge of an enterprise directly stated that “it’s terrible, and it’s eaten up our profits.”
“Textiles take up more space. The value of a container, or the added value, is not high. For example, the value of a container of machinery and equipment may be hundreds of thousands of dollars, while the value of a container of textiles is more than 30,000 or 40,000 dollars.”
“Most of our orders are in the FOB model, but a customer in Europe uses the CIF model. The original container was more than 3,000 euros, but now it has become more than 7,000 euros. The freight accounted for 22% of the value of the goods. This is terrible and has already suffered a serious loss. “

Ocean shipping

Source: Foreign Research Center, China News Weekly

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