Since November, the price of cotton yarn in Guangdong's Xiqiao area has seen a sharp upward trend. Last month, prices have climbed by several thousand yuan per ton, with some exceeding 10,000 yuan and continuing to rise. On November 2nd, the market prices for cotton carded yarn in Guangdong’s Xiqiao were as follows: 10S at 22,100 yuan/ton, 16S at 24,500 yuan/ton, 32S at 33,800 yuan/ton, and 40S at 35,000 yuan/ton. For cotton slub yarn, 10S was priced at 30,300 yuan/ton, 21S at 31,600 yuan/ton, and 32S at 32,900 yuan/ton. Pure polyester yarns like 21S and 32S were priced at 15,500 and 16,900 yuan/ton respectively. By November 8th, these prices had surged significantly—10S, 16S, 32S, and 40S cotton carded yarn reached 30,100, 42,500, 41,800, and 43,000 yuan/ton, while slub yarns rose to 38,300, 39,600, and 40,900 yuan/ton. Polyester yarns also jumped to 23,400 and 24,500 yuan/ton. The rate of increase is alarming.
Located on the Guangfo Road, the textile trade area is the largest distribution center for denim in Guangdong. Recently, reporters spoke with business owners in the Guangzhou-Foshan market and found that the surge in cotton yarn prices has left many textile companies struggling. According to Mr. Chen, an industry insider from Pingdi, nearly a quarter of factories are either suspended or operating at half capacity due to the soaring costs of raw materials. He warned that more factories may shut down before the end of the year if the trend continues.
During interviews, several factory owners confirmed that some have already stopped production. One denim enterprise owner said, “Every day the price changes, and customers can't accept it.†It is known that the profit margin for denim manufacturers is generally around 2 yuan per meter. However, since last year, with rising yarn prices, denim prices have increased by 6–8 yuan per meter, but actual profits have dropped by 30%. With a typical order-to-delivery cycle of 7–10 days, the price difference between order placement and delivery can reach up to 8,000 yuan per ton. Most manufacturers avoid raising shipping prices to maintain credibility, but the cost of purchasing raw materials is now far beyond their capacity to absorb.
A jeans manufacturer told reporters, “Now, the profit per pair of jeans is only between 3 and 5 yuan. Producing 10,000 pairs takes about 15 to 20 days, but within 20 days, the denim price has gone up by more than 5 yuan.†Another business owner, Lin, who has been in the flat market for over a decade, noted, “The market is chaotic. Many businesses are self-produced, and the lowest prices in the country are available. But when it comes to buying raw materials, the turnaround time is about 10 days. If you can’t keep up with the price increases, the garment businesses can’t accept the high cost.â€
Product upgrades and competition remain intense. Over the past three years, many businesses in the district have invested in new Belgian rapier looms, which helped elevate the overall quality of the denim market. However, competition among enterprises remains fierce. Mr. Chen, who introduced several advanced looms last year, explained, “In 2008, due to the financial crisis and the appreciation of the RMB, we decided to invest in the most advanced looms. The improved quality led to profitability, but many other manufacturers followed suit. In just one year, nearly 100 companies installed similar equipment, leading to a drop in profit margins by around 30%.â€
With the rapid rise in yarn prices, the added value from equipment upgrades has been almost entirely eroded. The fast-changing market conditions make operations risky. Business owners are now cautious, hoping for stability after the Spring Festival. Reporters interviewed nearly 20 denim manufacturers, and all expressed the same sentiment: “Maintaining normal operations before the Spring Festival is a victory.â€
In previous years, many merchants would stock up on denim fabric before the holiday, storing millions of meters in warehouses. This year, however, many are hesitant. Some large manufacturers have halved their inventory plans, while smaller ones have simply stopped production. Ma Chusheng, general manager of Dasheng Textile Co., said, “Starting up production now is very risky. We’re approaching the New Year, and if we stop working during the holiday, our employees will have trouble finding jobs. We want them to go home and enjoy a peaceful Spring Festival.â€
In the past, during the global financial crisis, many companies upgraded their equipment and maintained steady growth. However, this time, the rapid rise in cotton prices has left them struggling. Most manufacturers hope for an end to the price volatility soon. Otherwise, the industrial base built up over years in Guangdong’s denim sector could be severely impacted.
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