In 2020, due to the demand for epidemic prevention materials, China's technical textile industry experienced a round of rapid growth, which has accumulated a large base for development in 2021. At the same time, the demand for epidemic prevention materials has dropped significantly with the changed global pandemic. The revenue and profit growth of surgical masks, protective clothing, and related raw materials industries will see a sharp decrease in 2021, driving the decline in the growth rate of the main economic indicators of the entire industry.

I. Overall demand and production

According to a survey conducted by the China Nonwovens & Industrial Textile Association (CNITA) on member enterprises, 40% indicated that domestic and foreign market demand has declined to varying degrees. In the first half of the year, the domestic and international market demand indexes were only 49.0 and 43.4, both were in the contraction range. Thereinto, the demand index in the domestic and international market were only 31.4 and 34.8, laying at the lowest level among the industry. In areas that are not closely related to anti-epidemic materials, the demand has shown a relatively obvious recovery trend. For example, the demand index for twine & rope (cable) and padding cloth reached 69.9 and 60.0, respectively; and the demand index for textiles for transportation vehicles was 57.1. Due to the decline in demand, the operating rate of enterprises has generally declined. According to the survey, 27.5% of the enterprises reckoned that they were able to produce at full capacity, 36% said that the capacity utilization rate was around 80%, 18.8% had around 60% capacity utilization rate, and 17.6% had a capacity utilization rate of less than 40%.

II. Adjusted operating conditions

According to data from the National Bureau of Statistics, from January to May 2021, the industrial added value of enterprises above designated size in China's technical textile industry fell by 11.9% year-on-year. But its two-year average growth still reached 15.2%. The operating income of enterprises above designated size in China's technical textile industry reached CNY 117.51 billion, up by 0.3% year-on-year. And the total profit reached CNY 7.02 billion, dropped by 54.5% year-on-year. The profit rate was 6.0%, seeing a year-on-year decrease of 7.2 percentage points. Although the growth rate of operating income and total profit has dropped significantly, the profitability of China's technical textile industry is still in a relatively ideal state, which is only lower than that of chemical fiber and textile machinery among China's textile industry.

Enterprises have a rational understanding of current adjustments. According to the CNITA's survey, nearly 16% of the enterprises indicated that their profits have fallen by more than 50%. Further investigations of 65 enterprises whose profits have fallen by more than 20% showed that among them, 40% believed that this is a normal adjustment for the rapid growth in 2020, requiring one to two years to get out of this round of adjustment period.

In terms of sectors, from January to May, the operating income and total profits of nonwovens enterprises above designated size decreased by 7.7% and 67.8% year-on-year, respectively. And the profit margin was 6.2%, down 11.5 percentage points year-on-year. The operating income and total profit of twine & rope (cable) enterprises above designated size increased by 24.6% and 43.6% year-on-year respectively. Its profit rate was 4.2%, up by 0.6 percentage points year-on-year. The operating income and total profits of textile belts and cord fabrics enterprises above designated size surged by 28.2% and 198.0% year-on-year, respectively. The profit rate was 5.7%, up by 3.3% year-on-year. The operating income and total profits of awnings enterprises above designated size soared by 37.4% and 63.3% year-on-year, respectively, and the profit rate was 6.2%, increased by 1.0% year-on-year. The operating income and total profits of other technical textile enterprises above designated size (medical & hygienic textiles, filtration, geotextiles) decreased by 10.3% and 53.5% year-on-year, respectively, and its profit rate was 6.0%, seeing a year-on-year decrease of 5.6 percentage points.

In terms of cost, the surveyed enterprises generally reported that the prices of raw materials in the first half of the year have changed significantly. The industry's raw material price index was 77.1, which is in a fast-rising range. The turnover of account receivable of enterprises also showed a substantial increase. From January to May, the turnover of account receivable of enterprises above designated size in the technical textile industry increased by 21.8%, which was much higher than the income growth. The labor cost of enterprises grew continually with moderate growth. Two-thirds of the enterprises said that the labor cost in the first half of the year increased, and 27% of the enterprises said that the increase was more than 10%.

III. Investment

Among the surveyed enterprises, nearly 40% of the enterprises have projects under construction; 8% have canceled or postponed planned investment projects, and the remaining enterprises have no investment projects. Of the investment projects under construction, 64% involved upgrading and renovation of existing equipment, 44% involved plant construction, and 17% involved environmental protection renovation. Despite the high-speed expansion in 2020, 16.7% of enterprises still indicated insufficient production capacity. These enterprises are mainly concentrated in the fields of filtration, safety protection, twine & rope (cable), ribbon, and nonwovens. The investment enthusiasm in different fields reflected the great differences in the internal market structure of the technical textile industry and reflects the strong ability to resist risks.

IV. Exports

According to data of China Customs, from January to May, China's chemical fiber nonwoven protective clothing (including medical protective clothing) exports were US$ 1.43 billion, seeing a year-on-year decrease of 34.5%; the exports of unlisted textiles (including surgical masks) reached US$ 6.01 billion, dropped by 75.1% year-on-year. The exports of non-epidemic materials reflected a strong momentum of recovery. The exports of nonwovens, specialty yarns, twine & rope (cable), ribbon was US$ 3.52 billion worth, surged by 46.4% year-on-year. Thereinto, the exports of nonwovens reached US$ 2.04 billion, surged 54.9% year-on-year. While the exports of technical textiles was US$ 3.5 billion, up by 38.0% year-on-year.

V. Difficulties and challenges faced by the technical textile industry

Regarding the main difficulties currently facing the technical textile industry, 50.4% of enterprises believed that market demand is declining, and orders are insufficient. These enterprises mainly come from enterprises in the anti-epidemic materials industry. The second major problem facing enterprises is that global travel is stagnation due to the epidemic prevention and control, enterprises cannot participate in foreign exhibitions and visit international customers. They are facing resistance in opening up the international market. 37.8% of enterprises said that it is difficult to hire qualified workers, and the turnover rate of frontline workers is high. In addition, international shipping costs have also increased significantly.

In terms of external challenges faced by enterprises, the excessively rapid increase in raw material prices is a common problem reported by enterprises. 52.4% of enterprises believed that excessive expansion of production capacity has caused excessive competition in the industry. Enterprises are generally more optimistic about competition from low-cost countries. Enterprises have strong confidence in their own innovation capabilities, product quality and customer relationships, and are confident to participate in global competition.

Source: CHINA TEXTILE LEADER Express