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Insight | Time:Aug 22 2017 2:55PM
Environmental protection storm sweeping textile industry
 
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With environmental protection more intensive and stricter, textile industry gains more rectification both in regions and in scale. Textile mills actively deal with it but face difficulties at the same time.

Region
Environmental measure
Zhejiang In Apr, Jiaxing started to eliminate water-jet looms;
In mid-Jun, some dyeing mills were shut down in Jiaxing and most enterprises were monitored;
In Aug, the fourth batch of environmental inspection team entered.
Fujian In Mar, many printing and dyeing mills were monitored in Quanzhou and coal-fired plants and waste gas were rectified;
In Apr, the third batch of environmental inspection team entered.
Guangdong In Feb-Mar, many printing and dyeing mills were monitored and rectified in Puning;
In Apr, outdated enterprises discharging pollutant started to be eliminated in Jiangmen.
Shandong Coal-fired boilers were rectified in H1 2017;
The fourth round of environmental inspection team entered.
Hebei Coal-fired boilers were eliminated intensively by end-June, 2017;
Some dyeing mills in Gaoyang were shut down in Mar and operating rate was cut a half;
Environmental impact assessment was conducted in Jul- Sep.
Jiangsu Water-jet looms in Wujiang started to be eliminated intensively since Apr;
Dyeing mills in Wujiang were shut down in turn since mid-Jun

The rectified sectors are mainly coal-fired boilers, dyeing mills and waste gas and water. Textile mills involved ranges from upstream VSF plants, ginning mills, mid-stream spinners to downstream printing and dyeing mills and weavers. 

Impacts on grey fabric and printing and dyeing industry
The rectification on sizing plants and printing and dyeing mills results in decline of operating rate. With Aug, traditional peak season of demand coming, some dyeing mills show tight supply. Rectification for sizing plants mainly involves transformation of boilers and treatment of waste water while printing and dyeing mills are impacted a lot relatively. Printing and dyeing mills in Shaoxing upgraded largely after wide-range rectification and relocation last year while for those relatively backward printing and dyeing mills, over a half halted production.

Rise of cost for dyeing, sizing and delivery brought by rectification, relocation and replacement of dyeing mills hits weaving industry with thin profits and upstream hard. For example, disperse black ECT300% moved up by 30% to current 30yuan/kg from 23yuan/kg since early 2017.

Cost for sizing is also reflected up by 0.1-0.2yuan/m due to environmental rectification. Taking conventional cotton grey fabric as an example, according to processing fee before the rise and profits of -0.2-0.15yuan/mt, the 0.1-0.2yuan/m rise of sizing obviously expects cost transfer later, or else profits of grey fabric will be compressed directly.


In addition, cost of boiler transformation in some fabric plants is heard at 0.05-0.1yuan/m.

The impacts extending to upstream yarn
Cost for dyeing and finishing, sizing and boiler transformation will directly provide pressure on grey fabric plants and other fabric plants while price rise and weakened profits will lead to order loss or slide of order taking. Therefore, demand for cotton yarn will be bearish.

Besides, elimination of water-jet looms also has effects on demand for yarn like open-end polyester yarn, especially PFY. Few small spinners without qualification or not standard are shut down while some will bear rectification cost.

Conclusion
Stricter environmental protection policy does not mean continually weakening demand. Firstly, cost like boiler transformation is mostly transferred and downstream needs time to accept. Secondly, environmental protection storm will finally eliminate those with high energy consumption or heavy pollution and investment of new idea and equipment will prompt the rest enterprises to establish new pattern of pricing and bring new demand pattern.

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