CCTV Perspective: Who Will Dominate The Future Of Textile Industry?

Guide:

Ji Yu (host): Hello, everyone. Welcome to continue watching the live broadcast.

Cotton price "roller coaster"

Commentary: Chinese cotton

Cheng Guoqiang (researcher of the State Council Development Research Center): because of the change of supply and demand, we can gain profits through the relative price of investment, so we decided the fluctuation of agricultural products (000061) price. In addition to the traditional factors, it is more important to consider its very factor, that is, financial attribute, its dollar attribute, and this kind of climate change and media effect.

It is expected that not only industrial research departments, market investors are also highly concerned about how the market will evolve next, but today we invite Mr. Sun Huaibin, director of the Ministry of industry of the China Textile Industry Association, to come to our studio to discuss with us the topic of hot market. Hello, director Sun, welcome to the studio. We can see that from last year to this year, the price of cotton is really rising. In May, the market has fluctuated greatly from 25000 to 26000 to 23000. Ji Yu: Well, the sharp fluctuations in the cotton price market really exceed many market participants.

Sun Huaibin (director of China Textile Economic Research Center): as a commodity, as a basic industrial raw material, cotton should be fluctuated according to the market supply and demand.

Ji Yu: what is the reason behind it?

Sun Huaibin: the reason behind the supply and demand gap is the fundamental reason, because our current processing capacity and cotton futures are still unbalanced, there is a hard gap, but since last year, this big fluctuation, I think a very important reason is that there is some kind of speculation about capital.

Ji Yu: that is what professionals now call financial attributes and cotton's financial attributes to cotton.

Sun Huaibin: showing a kind of unusual character of cotton.

Ji Yu: where do these funds come from?

Sun Huaibin: investment funds cause cotton prices to rise and fall

Sun Huaibin: I think this kind of fund is probably a social hot money. Yes, there are also hot money abroad, because they need to find a way out. If the real estate is not strong enough and the stock is in bad condition, they will choose the commodities, and the cotton will become the first choice. Because the demand elasticity of the cotton is relatively large, it may be better fried than the food, so we choose cotton.

Ji Yu: then, in the process of watching a big and huge drama, we should be concerned about what the trend will be in the next stage.

Sun Huaibin: at the next stage, because now from our country's situation, this year's cotton planting area has increased from last year's cotton price, the sown area has expanded this year, probably increased by more than 6%, so that people will have a kind of expectation, the supply will increase, but how much will it supply, it also depends on God, cotton seeds planted in the field.

Ji Yu: depend on heaven for food.

Sun Huaibin: weather and other uncertainties affect cotton production

Sun Huaibin: the weather is very important. The weather decides the output. In addition, there is also our demand. This year, textile enterprises, I think you also know, facing a very big constraint factor is capital, because now the country has to press CPI.

Ji Yu: we must control inflation.

Sun Huaibin: monetary policy is controlling inflation. Is it right? Constantly raising the reserve ratio and raising interest rates, so that our textile enterprises know that they are the main body of a small and medium-sized enterprise, but also a large number of non-state-owned enterprises and private enterprises.

Ji Yu accounted for the overwhelming majority.

Sun Huaibin: so it is more and more difficult to get funds from banks. This will lead to the demand for raw materials, which will be restricted by funds.

Plus this year, because of the fluctuation of cotton prices, many of our enterprises are buying high priced cotton. Right? Now cotton prices are falling and yarn is falling. If we fall, our enterprises will lose a lot of money, because the raw materials will be lost and the products will be in deficit.

Ji Yu: and there is another one. I know that there are some large cotton spinning enterprises in Jiangsu and Zhejiang provinces, and the cost of capital in China's small and medium sized cotton spinning enterprises is also increasing.

Sun Huaibin: cotton prices in the future depend on output.

Sun Huaibin: Yes, such pressure will lead to the pressure of inventory. The contradiction between our inventory and inventory is very prominent. This also inhibits the demand for cotton purchase.

Ji Yu: so if we understand, is the price of cotton in the next stage going down steadily?

This process, because we see the analysis just now, is, on the one hand, the demand for cotton by the cotton textile enterprises and the production enterprises, rather than the lack of demand, but the cost of funds in all aspects, and the restriction of the market in various aspects, on the purchase volume, is the whole price of raw cotton going downward?

Sun Huaibin: domestic consumption and international demand affect cotton prices

Sun Huaibin: it should be like this. Because now the demand is troubled by funds, the textile enterprises purchase cotton products, including the pmission of products in the future, and we are all very cautious. Yes, because there is a kind of inertia, that is, the more we fall, the more we will not buy, the more we will follow up, and this is also the case.

Ji Yu: there is such a rule in the investment field. If we buy it up or not, we will turn our attention to see how the investors and analysts think about the fluctuation of cotton prices in the commodity futures market. Let's take a break. Then we connect Song Jian. He is an industry researcher of China International Cargo Limited company, Song Jian.

Song Jian: Hello, host.

Ji Yu: so just now we talked with director Sun about the recent fluctuating price of cotton, so if the price of the spot market fluctuates, will there be the same or similar performance in the cotton futures market?

Song Jian: the supply and demand situation has improved significantly this year.

　　宋健(中国国际期货有限公司研究员)：是这样，我们承认一个现货市场的基本面，确实是为我们期货市场提供了很好炒作借口，所以才口去年的暴涨暴跌，我们知道暴涨暴跌，在期货市场这种炒作因素能够比较明显的看的出来，比如说我们以两合约为例，一个是当年炒的比较凶的1109合约，以及现在的1102合约，在1109合约当年炒作的高点，达到三万五附近，现在跌到两万五左右，这个跌幅达到了30%左右，但同样的现在1102合约，其实在当年1109创在三万五高点附近时，其实1102合约高点与前期没法比的，当时仅仅三万左右，现在跌到2万4左右，跌幅接近20%左右，这种不同合约差异，已经明显显示出市场炒作的因素的影响是很大的，对这边来讲，我们认为一个是基本面，确实有一定的原因，但是另一方面，期货市场炒作的因素也不容忽视。

Ji Yu: the speculation in the futures market can not be ignored. What is worth our attention is that there is a high degree of relevance and tightness in the domestic commodity futures market and foreign commodity futures markets. Apart from the contradiction between supply and demand in the domestic market, Song Jian, from your observation, is the impact of foreign market capital changes and price changes on domestic cotton futures varieties very large?

　　宋健：其实是这样的，尤其这一轮的炒作，其实它的属端是源于国外的市场，我们知道国外的话，其实它的期棉基本上是从2010年的7月末、8月初开始炒作，由当时的七八十美分，一直炒到了最高点，达到了200美分以上，而国内炒作晚了一月，基本是八月份才开始炒作，而且仅仅是从一万七八附近一直炒到了三万五附近，基本是翻一倍，但是国外的达到了3倍，这里更明显的看的出来，其实外盘的炒作，带动了内盘的炒作，这是棉花重要的一个原因之一，对于包括最近其实我们也看到，就说外盘现在应该说，这些多投炒作，还是心没有死，目前回落的价格，还是回落到一百四五附近，这个价格还是比较高，而国内由于受到基本面的影响，投资者包括国家调控的影响下，会显得相对更加理性一些。

Ji Yu: Well, thank you for the analysis that Song Jian brought to us. Then we see a variety of market factors, the factors of capital, which make the cotton price fluctuate violently. Let's see what the correlation between international cotton output and international market is, and how to determine the next cotton price trend.

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Experts expect cotton production to increase steadily this year.

Commentary: according to the cotton association of China, the cotton planting area in the whole country was 81 million mu in 2011, an increase of 5.2% over the previous year. The middle and lower reaches of the Yangtze River suffered a rare drought this year. The recent drought and floods in some provinces have a certain effect on the growth of cotton. However, the cotton growing in Xinjiang and the Yellow River is better. If there is no major natural calamity, cotton is expected to achieve a good harvest this year.

Ren Xinpu (vice president of Yongan Futures Research Institute): according to the situation of China Meteorological Administration, we also basically hold that cotton growth weather this year should be relative preference.

Zhang Jianyuan (Deputy Secretary General of Hubei Cotton Association): according to our cotton association, our cotton planting area increased by more than 10% over the past year, and the actual investigation in rural areas is very rare in previous years. For example, one is on the ridge, one on the side of the fish pond, and the other on the roadside or even on the roadside flower beds of some township roads.

Commentary: for the domestic market, the change of international cotton prices also has a profound impact on the direction of domestic cotton market. According to the prediction of the International Cotton Advisory Committee, from 2011 to 2012, the global cotton output was estimated at 2608 tons, an increase of 128 tons compared with the same period last year, while the actual output is expected to increase more. The cotton price of Nu Shang is bullish in the past year, rising from more than 70 US dollars in June last year to 227 US dollars in March this year, up 200%, but since mid April, with the international commodity collective collapse, it has dropped 20%.

Zhang Jianyuan: like some members of the cotton association of our province, this price should continue, which is a slight increase in the recovery rate. This will continue, because we understand that although the size of the United States cotton has increased, some major cotton areas in the United States have also suffered droughts this year. Although the area has increased, the actual output of the United States will not increase much or even decrease if the area of actual output is estimated to cancel each other.

Commentary: in addition, from the domestic downstream demand, under the tight economic environment, textile enterprises increased their capital pressure and were cautious about raw material procurement. Meanwhile, the rapid growth of the global replenishment stock market ended, which led to the textile and garment export not booming, and also inhibited the demand for cotton. Customs data showed that the total export volume of textiles and clothing in China increased from 68 billion 500 million to 27.39% in the year from January to April, but the increase in textile and clothing exports was mainly due to the increase in product prices. The quantity growth in the first four months of this year was only about 5%.

Ji Yu: from the video we just learned, the supply and demand in the market is very interesting and a great change has taken place in this round of cotton price game. With the continuous enlargement of cotton growing area in our country, especially some experts of cotton Department, we have told us that it is a steady increase in income. This also plays a very important role and signal role in stabilizing the cotton market price. Here, let's have an exchange with Mr. Sun Huaibin, director of the Ministry of industry of the China Textile Industry Association. How do you think of the expansion of the planting area just 5.2% to 6% this year, Mr. sun, what kind of stable supply will it provide for our entire cotton market?

Sun Huaibin: weather and other uncertainties affect cotton production

Sun Huaibin: the sowing area has been sown. As we have said before, the area is growing, the area is determined by price, but this area can become the actual output increase. Here is the farming of the farmers' brothers.

Ji Yu: if we get rid of the weather factors and interfere with the abandoning, how much can we supply directly to the market after enlarging the planting area?

Sun Huaibin: now the cotton in our country is probably between 650 and 7 million tons a year. It is generally around such a production. However, our demand is relatively large, which is about 11 million tons. So I mentioned before that the gap is a hard gap, so it needs to be imported from the import. Of course, the country needs some warehousing and storage to make up for the gap.

Ji Yu: Well, we see that the market is actually playing a game in all aspects. Both we say that the supply from the agricultural sector, there are also changes in the demand of the production department, and the changes in the whole environment of the international market. Well, let's pay attention again to what kind of impact will have on the violent fluctuation of cotton prices for the upstream and downstream enterprises, especially for the listed companies concerned by our capital market investors.

Commentary: at present, there are 21 Cotton Textile Listed Companies in the A-share market. From the first quarter results, the performance of the 21 companies is poor, and the total profit of the 21 companies is only 57 million 600 thousand. As a result, the non recurring earnings of manufacturers, shares, investment income and other non recurring earnings have increased by 147% over the same period, but the ring ratio has dropped 11%. In the 21 companies, three companies have suffered losses, and the performance of the 14 companies has declined.

Zhao Shuangzhen (general manager of Shandong Heze national flower Cotton Industry Co., Ltd.): after the fall, the cooperative enterprises failed to guarantee the value of this item, and the loss was very great. The cotton cost at that time was generally about two periods, plus interest to more than 40000 now, about two times, it was good, the new cotton leaves were about 20 thousand and 6, and seven thousand or eight thousand yuan was reduced, the upstream enterprises accounted for 60%, the downstream enterprises accounted for 80%, and the enterprises with full load were few.

Zhang Jianyuan: especially in our province, especially in the textile industry of our country, at present, the situation of our country's textile industry is not good. As far as we know, the capacity of 1/3 has been stopped. Some are a lot of enterprises. It is said that the other production capacity has been stopped while maintaining the basic starting needs. In this case, textile, if the textile links, the textile industry can not be full of vitality, the impact on the cotton mobile enterprises is very large, including the very large cotton Dacron.

Ji Yu: just now, our reporter interviewed the expert, and the experts told us that the domestic 1/3 production capacity is stagnant, and 2/3 maintains its operation. This is the 2/3 production capacity of the textile industry, which affects the economic effect of some listed companies in the middle.

We connect Li Xin, chief analyst of CITIC Securities (600030), and communicate with her, Li Xin.

Li Xin (chief analyst of CITIC Securities textile and garment industry): Hello, host.

Ji Yu: Hello, the sharp fluctuation of cotton price has made a great impact on the cotton textile enterprises and clothing listed companies. From your professional research, what extent will the performance of these companies affect?

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Huge fluctuations in cotton prices, listed companies unhappy

Li Xin: Yes, it should be last year, in the process of rising cotton prices, the processing and manufacturing of cotton textile enterprises should be more beneficial, because the stock is always lower than the market price, so it is beneficial, so far, actually from the perspective of corporate profits, it has not been affected, because their orders are in the first quarter, then cotton prices were higher in the first quarter, so the price of products at that time was relatively high, so the two quarter's performance has not yet had a greater impact, but now the three quarter orders have seen a significant decline, so we judged that the overall performance may be higher than before.

And we think that in August and September of this year, when new cotton comes into the market, cotton prices may also be callback. In this way, enterprises will be very disadvantageous in the way of raw material price decline, one is inventory management, and its products may be facing a decline in prices, and revenue will also shrink, and profits may also decline.

But if the cotton price is stable after the adjustment is stable, then in fact, the whole industry chain is more beneficial, will enjoy a relatively low raw material costs.

On the other hand, we note, on the other hand, the huge fluctuation of cotton price, also make many cotton textile and clothing enterprises, begin to choose some substitute chemical fiber products, those chemical fiber substitute products, the market price fluctuation is lower than the current we see the fluctuation rate of cotton prices. From this point of view, those companies that produce cotton substitute products will benefit from this wave of cotton price rise and fall?

Li Xin, your judgement?

Li Xin: cotton price fluctuations affect three quarter orders

Li Xin: that is to say, during the process of rising last year, such as polyester staple fiber and cotton viscose staple fiber, the starting point of its increase is more than cotton price. In fact, the two sub sectors are relatively benefiting from the latter half of the cotton price rise, but the current situation is that, with the fall of cotton, especially the price of viscose fiber is also showing a relatively large decline, so polyester fiber, because it also faces oil prices, because its cost comes from oil prices, so its price is currently relatively small, but it is far less profitable than last year.

Ji Yu: Well, thank Li Xin for bringing us this kind of hint and judgement from the perspective of capital market to some enterprises' earnings and possible market risks. Now let's go back to Mr. Sun Huaibin, director of the Beijing studio and the director of the China Textile Industry Association's industry department, and continue to exchange ideas. Director Sun, from the market environment we just understood, we are still very concerned about the production and operation status of the cotton textile enterprises.

Sun Huaibin: now cotton textile enterprises are affected by the fluctuation of cotton prices. First of all, many enterprises have a reduction in production, because many industries will cause a great deal.

Ji Yu: a big loss.

Sun Huaibin: substantial increase in stock of spinning enterprises

Sun Huaibin: second, because of the high cotton price inventory, the loss of raw materials and the backlog of products, coupled with the constraints of capital, it should be said that the business situation is obviously not as good as that of last year. Last year, it also made money. Many enterprises, cotton spinning enterprises, estimated that many enterprises had spit out.

Ji Yu: in the past two years, because of the huge fluctuation of cotton prices, the income of last year should be compensated for this year's deficit.

Sun Huaibin: that's right.

Ji Yu: another analysis is that we are concerned about it. Just now many experts have mentioned that now cotton spinning enterprises have a large number of stocks in the first quarter. Now they may be in a slow position to stop buying raw cotton, but in the state of inventory, between inventory and inventory, how much do you feel about the operation of modern cotton spinning enterprises?

Sun Huaibin: the direct impact is efficiency and full load operation. As I mentioned earlier, the phenomenon of stop production and production reduction is more serious. For the middle and lower reaches, I think it may bring some benefits to some extent.

Ji Yu: how do you understand it?

Sun Huaibin: why? Because both yarn and cloth are on the price. For dyeing and finishing, clothing and home textiles, they can buy more raw materials cheaper than last year. This is good for reducing cost, the key is its terminal consumption.