Transcript Challenges and Opportunities in New Environment

Challenges and Opportunities in New
Environment
Feng Mengxiao, CNCIC
Content
Textile performance
Challenges and Opportunities in New
Environment
Textile Performance
Key fiscal indicators of
cotton spinning for 2013
Time
asset-liability
ratio
turnover of
current
assets
account
receivable
turnover
Ratio of
profits to cost
Jan-Dec, 2013
55.78
2.85
14.4
5.82
Jan-Dec, 2012
56.04
2.78
14.03
5.63
Change
-0.26
0.07
0.37
0.18
120
100
80
60
40
20
0
-20
2009年1-5月
2009年1-8月
2009年1-11月
2010年1-2月
2010年1-5月
2010年1-8月
2010年1-11月
2011年1-2月
2011年1-3月
2011年1-4月
2011年1-5月
2011年1-6月
2011年1-7月
2011年1-8月
2011年1-9月
2011年1-10月
2011年1-11月
2011年1-12月
2012年1-2月
2012年1-3月
2012年1-4月
2012年1-5月
2012年1-6月
2012年1-7月
2012年1-8月
2012年1-9月
2012年1-10月
2012年1-11月
2012年1-12月
2013年1-2月
2013年1-3月
2013年1-4月
2013年1-5月
2013年1-6月
2013年1-7月
2013年1-8月
2013年1-9月
2013年1-10月
2013年1-11月
2013年1-12月
Profit growth of scaled cotton
spinning enterprises
%
近年来棉纱进口量快速扩大
时 期
2013年9-12月
2012年9-12月
2012/13年度
2011/12年度
2010/11年度
2009/10年度
2008/09年度
棉纱进口量（万吨） 同比增长（%）
73.23
26.82
57.74
194.35
48.01
131.31
43.27
91.65
-17.48
111.06
26.16
88.03
8.75
Greater elasticity in cotton
consumption
 R&D of non-cotton fiber advances，MMF raw material
still has downside potential
 Competition between low-count yarn and domestic
cotton will continue
 Greater elasticity in cotton consumption
 China’s textile performance now less correlates with
cotton consumption and appear unlikely to return
Challenges and Opportunities
in New Environment
ICAC forecast（March, 2014）
单位：万吨
项目
期初库存
产量
消费
进口
出口
期末库存
库存消费比
库存消费比
(不含中国)
2012/13年度
2013/14年度
2014/15年度
当月
同比±%
当月
同比±%
当月
同比±%
1461.1
2682.9
2334
970.8
1002.7
1778
76.2
54.4
-4.3
2.4
-0.5
1.6
21.7
12.1
1778
2574.8
2359.6
857.8
857.8
1993.2
84.5
21.7
-4
1.1
-11.6
-14.5
12.1
8.3
1993
2534
2443
800
800
2084
85.3
12.1
-1.6
3.5
-6.7
-6.7
4.6
0.8
54
-6
53
-1
53
0
数据来源：国际棉花咨询委员会（ICAC）。
Commercial stock decreases
further
 NCMMS survey shows that by March 7,seed cotton delivery
progress reached 97.5%, unchanged from a year earlier.
Cotton ginning progress reached 99%, down 0.2 point. Sales
progress reached 95.5%, up 0.6 point. Xinjiang cotton
harvest, delivery, ginning have completed. Sales was 4.3
points behind a year ago at 99.1%. Cotton stock in
marketing channel is about 121000 tons less than a year ago.
 Reserve purchase dropped sharply in February to total 327000
tons, a decrease of 438000 tons from January. By the end of
March, 2013/14 reserve purchase totaled 6.3 mil tons.
Cautious approach and a
slower business
 Average industrial cotton stock is equivalent to 36.6 days, including port
arrivals, down 0.4 day from previous month, 4.2 days less than a year ago,
also 4.6 days less than recent 3-yr average
 Yarn reported a production-to-sale ratio of 94.2%，down 0.4 point from
prevous month, up 1.1 point from a year ago. Yarn stock is equivalent to
26.4 days of sale, up 1.3 days from previous month and 3.2 days more than
a year ago
 Fabric reported a production-to-sale ratio of 93%, up 0.2 point and 4.4
points；库存. Fabric stock is equivalent to 48.9 days of sale, down 2.9
days and 9.1 days
 64% intend to purchase, down 5 points from Feb and down 8 points from a
year ago. 36% are undecided, up 5 points and 18 points. No one refuse to
buy cotton
 Daily reserve sale averaged 11000 tons, down from 23000 tons recorded last
season. By March 7, reserve selling totaled 646000 tons, 578000 tons of
domestic reserve and 68000 tons of imported reserve
Market awaits two major
policies
 Given a tight cotton supply, a lower auction price and
a combined quota against reserve sold, cotton price
tend to move lower
 If quota supply is abundant, domestic cotton price
should work lower to find a new balance
 ICE and import price tend to be volatile before new
policy is announced. The cotton industry is moving
into a period of caution and purchase of cotton, cotton
yarn, cotton fabric tend to slow down further and
cotton’s share in these products tend to drop
 The 2014 target price is expected to bring down
inventory levels again in the supply chain
 Cotton subsidy to have an opposite effect on cotton
price, compared with reserve procurement
Domestic and world price
Favorable economic environment
with a policy shift
 IMF forecast in January that world GDP is to grow 3.7％ in 2014，
the first upward revision in two years. World bank also noted
that world economy has been driven by new economies in the past
five years and now the developed nations are providing another
engine
 The trans-global game playing enters into a new stage as many
countries face a changing economic policy, particularly monetary
policy. Some new economies experienced some political unrest. The
dynamics on financial market is unlikely to fade out
 Chinese economy will have more vigor and economic performance is
expected to see further improvement
 The government work report projects 2014 GDP growth at 7.5%
 2014 is a year of reform that focuses on structural change,
enhanced reform, stabilizing growth and risk management. The
biggest anticipation comes from reform, e.g. reduced local debt,
tax cut, lower financing cost, improved enterprises' profit level
and further boost in consumer’s spending
Cotton industry to see another
consolidation with the new policy
 Cotton area in inland provinces will decrease sharply in the coming
years and the free market for cotton trade will see a major expansion
as the resource allocation will be largely driven by market
 Xinjiang cotton planting will become a hot investment and Xinjiang
cotton growing will have a guaranteed return protected by the
government, which brings a competitive edge
 The accumulation of key factors in China cotton market will accelerate
and the industry chain will see rapid consolidation and a deepening
growth
 Target: to minimize the production cost so as to achieve maximized
profit
 Horizontal: scaled cotton planting, cotton grower’s shift to farm
holders, the capacity of cotton procurement and processing will see a
major consolidation, cotton traders to begin various cooperation,
including procurement and merger
 Vertical: Cotton grower, procurement sector and even merchants and
textile firms will all consolidate
Summary
 Economic recovery in developed nations to be steady, new economies to see
political and market unrest. China’s economy to be stable with a new reform
policy
 World stock-to-use ratio (ex-China) is 1 percentage point lower than 2013,
which is at the neighborhood of normal years. Regardless of the abnormal years
of 2010、2011 and 2012, International Cotton Index (M) averaged 81.9 cent/lb
(11000 yuan/ton) in the past ten years
 Xinjiang cotton production is forecast at 4.5 mil tons, about half of the
domestic cotton use. Next season, some domestic mills are expected to regain
some competitiveness with a better quality domestic supply. Some of them
may recover and expand business. Domestic cotton consumption is likely to
grow and cotton import may increase
 The price gap will narrow. Some low-count yarn production are shifting back to
China from southeastern Asian countries.
 World cotton price to trend lower next season. Cotton, cotton yarn and cotton
fabric will all experience another consolidation
 The coming years will still be import opportunities for China cotton industry.
After sharing the global benefit for more than a decade, Chinese cotton
enterprises should quicken their step to globalization and allocate resources
worldwide.
 As the new round of Chinese reform begins, the next ten years will be a great
time of concentrated birth of Chinese international giants.
 We will discuss in more detail in CNCotton daily, weekly, monthly and special
reports
Thank you!
All data in this report come from
CNCotton
Tel：010-58931122