News

2022

Global shipping troubles, textile industry inventory imbalance

The world's shipping industry is facing its biggest dilemma in 65 years! Port congestion and rising or sustained freight rates have become the main themes in the first half of next year!

Since the outbreak of the COVID-19 pandemic, the shortcomings of outdated port infrastructure worldwide have become increasingly prominent. According to Kuehne+Nagel's real-time data, there are currently 353 cargo ships blocked in ports worldwide, twice the number at the beginning of the year. There are 22 freighters waiting outside the Ports of Long Beach and Los Angeles in the United States. Congestion has led to rising goods prices, delivery delays, market capacity mismatches, and an "explosive schedule" of freight rates.

One reason for global cargo congestion is the varying levels of border controls in different countries in response to the pandemic, and the forced shutdown of many factories, which endangers the smooth operation of the entire supply chain and causes soaring freight rates for shipping routes in China, the United States, and Europe.

In just two weeks, due to port congestion and new COVID-19 restrictions, the number of dry bulk carriers near Chinese ports has almost exploded.

According to AIS data obtained by dry bulk carrier Lauritzens Bulkers, recently, 7.5% of the world’s small dry bulk carriers, including Handysize and Supramax, are berthed near Chinese ports. This represents a 37% increase in just 10 days, equivalent to about 570 dry bulk carriers waiting to be unloaded at Chinese ports. Two weeks ago, the number was about 400 ships, and the total number of handy and super handy dry bulk ships worldwide was about 7,725.

More terrifying than the high sea freight and port congestion is the increase in stocks of grey fabrics!

After mid-July, orders in the downstream chemical fiber weaving industry gradually cooled. Although the overall operating rate remains high during the same period, it is difficult to analyze the situation in various regions and models in detail. In the second half of the year, what is more alarming than the lack of orders and high sea freight is the increase in the stocking of grey fabrics.

Currently, judging from the trends of various indicators, the start-up load of weaving remains at a high level compared to previous years, and the inventory of grey fabrics and raw materials is still within a controllable range. From the above three indicators, it can be determined that there is support for the load and price of diol, but an indicator that cannot be ignored is the number of order days. It is basically approaching the same period in 2020. The off-season atmosphere is undoubtedly evident. It can be concluded that the three indicators are relatively strong support points.

Although orders from Southeast Asia did return to some extent during this period, and orders for autumn and winter weaving were also launched in advance, much of the activity came from inquiries and orders by cloth dealers, which created a “prosperous” scene in the market. A large-scale signing model began, especially for autumn and winter orders.

So what effect does the weaving of grey cloth have on raw materials? On the surface, the excessive amount of grey cloth in society drags on the start of weaving, polyester yarn, and even PTA and ethylene glycol. Once merchants engage in intensive and large-scale low-price dumping, it will be extremely detrimental to the entire chain. However, through communication with cloth dealers, if the "Golden September and Silver October" period arrives as scheduled in the second half of the year or the price of polyester yarns remains firm, this portion of grey fabrics may be digested next year, and the impact on the market can be ignored for the time being.