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Hard times for Chinese downstream PTA industry
15
Mar '11
Because of some unexpected circumstances, downstream industries of PTA in China have been facing very hard time. As the costs are showing upward trends, the situation is expected to worsen in near future and will test the industry for the whole of 2011.

As per data available, current production cost of raw materials for one ton polyester is equivalent to current market price of polyester chips, without calculating labor costs, energy consumption and other costs. The main advantage of cost competitiveness of Chinese textiles and clothing is slowly but surely declining.

The industry faces difficulties on two counts. First, because of non-controllable factors like wars and earthquakes, due to which, prices of upstream products will continue to rise, making their product costlier. Second, they continue to suffer loss from their own product management.

Till date, Chinese textile and apparel industry has an advantage of low production cost making China the world leader. Due to rise in production cost, China is losing the advantage and will lose number one position too.

As domestic labor costs and raw material costs are rapidly rising, appreciation of the RMB exchange rate has turned the situation from bad to worse. Because of all these factors, China's textile and clothing companies lost some big export orders in the recent past.

Even recently held East China Fair felt the heat. Total turnover of this East China Fair (ECF) is US $2.839 billion, an increase of 3.88 percent from last session, but less when taken with a realistic view point. As textile and garment units were expected to increase their offers by more than 10 percent compared to last year, actual turnover this year is lower.

Inflation and raw material prices have affected production and operation of PTA enterprises badly. Though these units are under pressures, they still have to complete orders on hand and still continue operations despite adversities, as current raw material and other costs have still not exceeded selling prices.

As these companies did not make pre-procurement of raw materials for their inventories, they are compelled to accept rise in raw material prices.

Fibre2fashion News Desk

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