Orders surging while profits shrinking

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Influened by COVID-19, the export of labor-intensive textile and garment industries in India and Southeast Asian countries has suffered a severe contraction. Some textile orders have returned to China, and some domestic textile enterprises are operating at full capacity, but it seems to be more difficult to make money than before the outbreak of COVID-19. Why?
1.Raw material prices have soared, and profits have been diluted.
In recent days, the epidemic situation in foreign countries is still severe, and a considerable part of textile orders have indeed returned to China. Compared with the joy brought by increased orders, the current textile raw material prices all the way up more disturbing. Since the beginning of 2021, commodity prices have almost all started to rise. After the Spring Festival, the domestic textile raw material market has risen significantly, with spot prices of cotton, cotton yarn and staple fiber all the way up. Cotton yarn is the largest raw material in demand. Cotton prices have risen rapidly since the second half of last year, and yarn prices have also risen. Take grey cloth for example, the current cost has generally increased by about 20 to 30 percent.
2. Container “a box is hard to find”.
Since last September, shipping costs began to rise, and at the beginning of this year, the price of containers soared, some routes rose nearly 10 times, and is still “one box is hard to find”, which is foreign trade enterprises never expected. Shipping prices have tripled in two months, raising import and export costs.
On the one hand, the gradual rollout of vaccination in major countries and the large-scale expansion of domestic demand support policies have promoted the recovery of global economic activities. In addition, the rise of global online consumption and the rapid development of cross-border e-commerce have increased the demand for international freight transportation.
On the other hand, many shipping ports in the world are still closed or in a state of disordered management due to the impact of the epidemic. As a result, domestic containers shipped overseas will encounter difficulties in unloading and not being shipped back, which exacerbates the shortage of containers.
In addition, the cumulative problems of ships, dockworkers and freight drivers not expanding their crews in a timely manner are pushing up shipping prices.
3. In April and May this year, the RMB exchange rate against the US dollar showed a relatively rapid appreciation trend. At the end of May, the onshore and offshore RMB exchange rate against the US dollar both rose to 6.35 yuan, hitting a three-year high.
It has become the status quo of many foreign trade enterprises to silently bear the triple pressure of exchange rate appreciation, rising price of raw materials and soaring shipping costs. The exchange rate is 7 at the time of signing the bill, and 6.4 at the time of settlement, which is virtually a lot of losses.
Many foreign trade companies are now facing a single dare not accept the dilemma.

Post time: Jun-21-2021