China’s entire textile supply chain is facing rougher times ahead as export orders get cancelled and recovery prospects still far off and the world wallows in pandemic-induced recession.
“The textiles industry has … taken an absolute hammering,” John Richardson, ICIS Senior Asia Analyst said, and China would feel the brunt of the sharp decline in external demand as the country accounts for a third of global textiles exports.”
“China is at the very heart of the global polyester chain. It is the world’s biggest importer of PX [paraxylene] and ethylene glycols, the world’s biggest producer of PTA [purified terephthalic acid] and is always a net exporter of polyester fibres,” he said.
Chinese polyester producers recently reported higher sales and falling inventories but these may be short-lived due to expected weakness in exports.
Export orders from India and southeast Asia have recently been postponed as their downstream textile converters have shut production amid lockdowns. The same is true for the rest of the world.
“As so many people are in lockdown, they are not buying clothes. The crucial back to school season in the West in September won’t happen this year,” Richardson said. “The whole value chain has come to a horrible halt … because the Western retailers have cancelled orders,” he added.
The inventories have been high for the seventh straight year, with revenues of local textile and apparel producers in the red in 2018-2019, partly due to changing spending habits, ICIS analyst Rachel Qian said.
More than 90% of MEG in China goes into polyester production: As polyester demand is unlikely to post growth this year, MEG demand growth is projected to slow down to 0.6% from 5.0% in 2019, and will likely be accompanied by a 33% average decline in spot values, Qian said.
Outside China, textile and yarn industries are also slumping as export orders from Europe and the US have sharply declined. In India, the polyester markets had grinded to a halt amid the country’s 21-day lockdown. To prevent a build-up of inventories, PTA producers have taken to shutting down their facilities at this time.
