China Wool Textile Industry Association: Understand The Operating Situation Of Wool Textile Industry From January To May

In the past three months, the wool textile industry has been affected by the macro-economy and the terminal market, and the supply and demand situation has failed to show a rapid recovery as expected by the industry. There is still a block in the connection of the industrial chain. However, compared with the low base in the same period last year, the relevant growth performance is good.

　　 1、 From January to May, the production and supply level of wool textile industry recovered slowly

The production and supply level of wool products tends to slow down in the second quarter, and the production of knitting and weaving is not strong. From January to May, the wool yarn output of wool spinning enterprises above designated size increased by 6.4% year on year, and the growth rate rebounded compared with the same period last year. However, there is still a gap between the production level in 2019 and the same period before. Over the same period, the output of wool fabrics above designated size fell 5.9% year on year, higher than the level of the same period in 2020-2021, but significantly lower than the high level of wool fabric output in the same period last year.

YoY change of wool yarn output and wool fabric output in the first five months of 2018-2023

　　 2、 The demand of wool textile industry in the second quarter was basically stable, and domestic consumption is expected to further recover

　　 1. Domestic consumption of wool textile products has not yet recovered on a large scale

In the first five months of this year, the consumption of domestic retail market grew rapidly, especially in textile and clothing consumption. From January to May, the retail sales of clothing, shoes and hats, knitwear and textiles of units above the designated size increased by 14.1% year on year, and the online retail sales of clothing goods increased by 14.6% year on year, both showing rapid growth. Considering the low base in the same period last year, the rapid growth does not mean that domestic textile and clothing consumption has completely recovered. From the comparison of the retail sales of clothing, shoes and hats, and needle textiles from January to May in the past five years, the consumption situation from January to May in 2023 is the same as that of the same period in 2021. Based on the year-on-year growth of online retail sales of apparel goods in the first five months of the past five years, there is still a gap between the growth in 2023 and that in 2019 and 2021. In this context, the domestic consumption market of various wool textile products still needs to be further restored.

YoY change of clothing retail sales per unit above designated size and online retail sales of clothing products from January to May 2019 to 2023

Source: National Bureau of Statistics

　　 2. International textile and clothing consumption was basically stable, and China's wool textile market share in the United States declined

In 2023, retail consumption in major wool textile consumer markets will be relatively stable. In May, the retail sales in the United States and the United Kingdom increased by 1.6% and 4.8% respectively year on year. Among them, the retail sales of clothing products in the United States fell by 0.2% year on year, while that in the United Kingdom increased by 6.9%. In April, the retail sales in the European Union fell 2.9% year on year, while that in Japan rose 5.1% year on year, and that in clothing fell 0.6% year on year.

On this basis, the consumption situation of wool products in the main consumer markets is also different. From January to May, the consumption situation of American wool textile products fell back from the high growth rate of the previous year, and the import of wool textile products was basically flat on a year-on-year basis, with a total import of about 1.3 billion dollars; In the same period, Japan's wool textile consumption increased with the growth of its domestic consumption market. The year-on-year growth rate of imported wool textile products reached 48%, and the import volume was about 370 million dollars. In the first quarter, the EU imported a total of 1.14 billion euros of wool textile products from outside the EU, up 13% year on year.

Year on year changes of consumer market retail and clothing retail and changes in imports of wool and textile products in 2023

(Note: The retail market data of the United States and the United Kingdom are in May, the retail market data of the European Union and Japan are in April, the wool textile import data of the United States and Japan are from January to May, and the wool textile import data of the European Union are from January to March)

Source: National statistical offices

Influenced by the macro political and economic situation, the proportion of U.S. imports of Chinese wool textile products has declined rapidly since this year. From January to May, imports of wool textile products from China accounted for only 14% of the total imports of U.S. wool textile products, a year-on-year decline of nearly 5 percentage points. The import market of U.S. wool textile products was mainly replaced by the share of EU wool textile products, and its import share increased by about 6 percentage points. China's position in the EU and Japan markets is relatively stable, with little change.

Import shares of the United States, Japan and the European Union in 2023

(Note: Wool textile import data of the United States and Japan are from January to May, while those of the European Union are from January to March)

Source: National statistical offices

　　 3. Woolen textile exports remain stable

From January to May, the total export volume of various wool textile raw materials and products totaled 4.25 billion US dollars, up 8.4% year on year. From the perspective of overall export scale, except for the rapid decline of export scale affected by the epidemic in the first half of 2020, the export scale of wool textile products has basically remained stable in the first half of recent years, becoming a stable source of market demand in the industry. In particular, the export scale from January to May this year has approached the high level of the same period in 2018 (see the figure below).

Changes in export volume of wool textile raw materials and products (including different raw material categories) from January to May 2018 to 2023

Source: China Customs

The performance of wool products with different raw materials in this year is different from that in the first half of the past few years. From January to May this year, the total export of various products of wool (wool accounted for more than 50%) totaled $1.41 billion, up 13.4% year on year, but there is still a gap compared with the peak in the same period of 2018, and the market size still needs to be further restored. Over the same period, the total export of cashmere products (cashmere accounted for more than 50%) totaled US $540 million, down 8.5% from the same period last year, but still the second largest export of cashmere products in the past six years.

　　 3、 From January to May, the scale of wool textile enterprises expanded and their profitability was insufficient

　　 1. The scale growth of wool yarn department is better than that of wool weaving department

From January to May, the operating income of wool textile and dyeing and finishing enterprises above designated size increased by 8% year on year, and the income scale grew rapidly. Among them, the operating revenue of the top and yarn department grew faster, reaching 16.7%, while the growth of the wool weaving department declined faster, down 10% year on year. Due to the different base numbers of the previous year and the different income scales of different departments, the high growth rate of wool weaving enterprises fell back compared with the previous year.

Year on year changes in operating income of wool textile and dyeing and finishing enterprises above designated size (including different departments) from 2018 to 2023

(Note: Data from January to May in 2023)

　　 2. Profitability of wool textile enterprises falls back

Since the second quarter, the profitability of wool textile enterprises has decreased significantly. From January to May, the average profit margin of wool textile and dyeing and finishing enterprises above designated size was 2.5%, significantly lower than that of the previous two years.

Change of average profit rate of wool textile and dyeing and finishing enterprises above designated size from 2018 to 2023

(Note: Data from January to May in 2023)

　　 3. The connection between supply and demand of the industrial chain is blocked

Over the past 20 years, the inventory level of finished products of wool textile enterprises has continued to reach a high level of 2022, and the proportion of finished products in total inventory has further increased. The connection between supply and demand in the industrial chain is not smooth.

Changes in inventory (including finished goods inventory) of wool textile and dyeing and finishing enterprises above designated size in 2018-2023

(Note: Data from January to May in 2023)

The situation of the wool textile industry in the second half of the year will still depend on the supply and demand situation of the industry. Further recovering the consumption capacity of the domestic market, expanding foreign exchanges and actively developing the cycle of the two markets will become the key to the development of the industry throughout the year.