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Insight | Time:Jul 3 2018 3:47PM
Fabrics for apparel and home textiles run in the opposite direction
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The surge of ZCE cotton futures pushed prices along the industrial chain upward in May. Trading sentiment turned muted in Jun due to retreatment of ZCE cotton futures and coming slack season. Meanwhile, inventory in weavers increased rapidly and more bargains appeared. Thus what is the market appearance like?

1. Sales ratio of weavers lowers and price is slanting weak, obviously reflected in fabric for apparel.

After the Spring Festival, fabric market started with a good start. Both knitted and woven fabrics saw good sales and were traded higher amid active demand in Mar and Apr. Sales slowed down and were mainly for rigid demand in early May. In late May, although soaring ZCE cotton futures boosted prices of cotton and cotton yarn to increase sharply, the rising trend cannot be passed on to weavers considering lack of orders and high pressure from environmental protection. Entering Jun, weavers’ stockpiles spiked, especially fabrics for apparel. Some producers reported that price inquiries and new orders both shrank largely and more bargains were seen on the market.

2. Fabrics for home textiles develop well and the market runs forward stably.

Opposite with fabrics for apparel, fabrics for home textiles kept positive sales. In particular, since mid-Jun, some varieties have seen better sales and tight spot supply. 

In fact, home textile market shows upswing momentum in recent years. For example, in 2017, yarn, grey fabric and fabric for home textiles all remained steady sales. Especially in Mar-Apr and Sep, promoted by active demand in peak season, sales maintained smooth and were not stagnant even in traditional slack season. In the first half of 2018, the sales on home textile market also showed optimistic appearance.

Since 2012, revenue and profits of home textile enterprises above designated size kept positive growth in China. During Jan-Apr, 2018, revenue of 1847 home textile enterprises above designated size achieved 70.24 billion Yuan, up by 6.35% year on year, and profits amounted to 3.5 billion Yuan, up by 4.57% on the year. But the increment of revenue from major business was lower than that of profits, indicating that the quality improvement was not realized, which was mainly as increased cost was not passed on to end-users and enterprises turned harder to gain profit.

From above chart, revenue and net profits show positive growth, showing the improving trend of home textile industry.

Financial conditon of listed enterprises with home texitles in Q1 2018
Enterprise Revenue (million Yuan) Y-o-y change Net profit (million Yuan) Y-o-y change
Sunvim 1306 11.35% 88 -33.38%
Luolai 1172 10.75% 159 27.14%
Fuanna 552 28.04% 97 22.13%
Mendale 519 46.54% 58 38.60%
Dohia 159 11.47% 8 93.85%
Mlily 611 26.95% 8 -88.18%
Veken 284 -24.96% -6 -32.47%

3. Market outlook
Orders of fabrics for apparel to weavers are coming to an end and new ones are stagnant obviously. Heavy fabric sales may improve gradually alongside seasonal transition, but the volume will not large amid slack season. Weavers may cut operating rate or take holiday selectively due to high temperature in Jul and Aug, which will further color order-taking of apparel weavers.

In terms of fabrics for home textiles, there is no obvious boundary between slack and peak seasons. That is also why orders of fabrics for home textiles arrive at weavers successively and some varieties even show tight supply even in traditional slack season. Given that civil consumption level and habits improves continuously, real estate market will not retreat obviously and new construction, reconstruction and expansion are conducted intensively, fabrics for home textiles will keep improving.
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