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Low-operating rate operation of rayon yarn mills may continue
The effect of COVID-19 pandemic outside China on the textile and apparel industry gradually emerges. Orders cancellation in the early stage and bleak fresh orders have led to panic in the market. Various shut-down notices of printing and dyeing mills and apparel mills were always found on the network, which gradually flowed to the upstream, so yarn and fabric markets were gradually affected. 
 

Weavers mainly took the Tomb Sweeping Festival holidays (on Apr 4)around 7-15 days, while the proportion of rayon yarn mills to take a holiday increased from 50% in past years to more than 90%. Most of rayon yarn mills had holidays more than 3 days, and those in North China have 5-15 days leave. In order to alleviate their own sales burden and the accumulation of finished product, yarn mills mainly adjust production flexibly while waiting and seeing the holidays of downstream textile factories. 

Current high inventory brought huge burden to yarn mills, and sell-off increased after the Festival. The inventory was limited, and there were many conditions for the preservation of finished products. Compared with capital depreciation and deterioration risks, price reduction and promotion were the upset. Just according to the current situation, if the foreign countries ended blockade in May and mills gradually resumed work in Jun, the market in Apr-May will still suffer larger pressure. 

In the second quarter, as the market is expected to remain in limbo, production cut, sales promotion and inventory control are still the main operation ideas of the spinners. It is expected that the yarn O/R recovery will shrink this month. In addition, amid approaching May Day, a wider and longer holiday expectation exists. If the epidemic is controlled in mid-2020, the market will warm up somewhat. Although it will take time to digest the accumulated inventory in the first half, it will at least give enterprises confidence to resume production. 
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