Cotton prices rose to 30,000 yuan / ton some of the Pearl River Delta clothing factory closed
T/C Chambray Fabric,T/C Printed Fabric,Chambray Shirting Fabric,Woven Chambray Fabric Shaoxing Yingcheng Textile Co.,Ltd , https://www.sxyingcheng.com
After the Spring Festival, many textile and garment businesses often face a seasonal slowdown. This period typically marks the clearance phase for clothing, shoes, and other products, leading to sharp price drops. For numerous textile manufacturers, however, this time of year brings more challenges than opportunities. Rising production costs have made it increasingly difficult to maintain profit margins, especially when overseas orders are reluctant to absorb price hikes.
In the Pearl River Delta, where many garment factories are located, the situation has become dire. Several companies have either shut down or reduced their operations. Wu Yixiong, General Manager of Southland Garment Co., Ltd., shared that many manufacturers in Zengcheng, Guangzhou, have closed their doors or scaled back significantly. “If we can’t sustain the pressure, we might consider shifting our focus to other industries,†he said. He added that the ex-factory prices of clothing are struggling to keep up with rising costs, particularly for export orders where price increases are limited. Since last year, production costs have risen by 50%, but some jeans exports have only seen a 5% increase in price. Domestic sales also lack experience, making market expansion even harder.
The cost of raw materials continues to climb. After the Chinese New Year, domestic 328-point cotton prices have surged, influenced by rising U.S. cotton prices. Recently, the price per ton has increased by 10% to 15% compared to the end of last year. In the Pearl River Delta, labor shortages have forced factories to raise wages by over 10% since the end of last year. If a factory cannot offer at least 2,000 to 3,000 yuan per month, it’s nearly impossible to find workers. These rising costs are pushing even large factories like Southland Garment to the edge, while smaller ones face even greater pressure.
Xu Yuping, General Manager of Shenzhen Guller Fashion Co., Ltd., explained that the company must increase its product prices by at least 20% this year to offset rising costs. To manage this, they’ve closed their own small factories and shifted focus toward trade and R&D, outsourcing most of their production.
With the sharp rise in material and labor costs, many clothing and shoe items have seen price increases of 20% to 30%. However, these increases are not always well-received by the market. Both foreign and domestic consumers are showing resistance to higher prices. In Guangzhou, new spring collections have been priced between 600 to 1,000 yuan, a 20% increase from similar models last year. Reporters found that some consumers are opting for discounted autumn and winter items instead of the newly launched spring products. Many seasonal items have been heavily discounted, with some brands offering significant reductions.
Wang Qiang, a senior analyst at First Textile Network, noted that the market remains uncertain due to the sharp rise in cotton prices during the fourth quarter of last year. He pointed out that branded textile and apparel companies have a stronger ability to absorb cost increases compared to general manufacturing plants. Branded clothing is usually sold at three times the cost price, with high-end brands having even higher markups, giving them more flexibility to handle fluctuations. Some branded items currently being sold at a discount were produced before the recent material price hikes, and others are sold at lower prices to ensure that 80% of their products still make a profit.
Hong Zhiye, a senior advisor at the International Fashion Brand Development Management Center, warned that profit margins in the apparel industry are likely to shrink this year, especially for contract manufacturers. However, the pressure on domestic brands is even greater as more foreign brands flood the Chinese market. The rising industry standards may make foreign brands less adaptable. Hong suggested that domestic companies should accelerate their self-improvement and take advantage of the current opportunity when foreign competitors become dissatisfied.