Textile and Apparel Industry: Textile and apparel export growth slowed down in September, and the trend will continue in the fourth quarter
NINGBO LUCKY CHEMICAL INDUSTRY CO., LTD , https://www.chinaluckychem.com
On October 14, 2010, the General Administration of Customs released updated export statistics. From January to September, total textile and garment exports reached $149.82 billion, marking a year-on-year increase of 23.14%. Among these, textile exports amounted to $56.33 billion, up 30.70% compared to the same period last year, while apparel exports totaled $93.49 billion, reflecting a 19.00% growth. In September alone, the sector exported $20.016 billion worth of textiles and garments, representing a 19.49% annual increase. Textile exports in the month were $6.815 billion, rising by 20.19%, while clothing exports reached $13.201 billion, an increase of 19.13%.
Comment: The industry's export performance has shown consistent growth since April, but the rate of expansion has slowed down. In September, the monthly export value saw a drop of 9.11 percentage points from the previous month. We believe this slowdown is primarily due to several factors. First, the restocking effect in Europe and the U.S. has diminished. The European Union is implementing austerity measures to reduce its fiscal deficit, and August retail sales in the eurozone fell by 0.4%. Additionally, the manufacturing PMI in September hit its lowest level since January. Although the U.S. economy has stabilized, employment and credit markets are still recovering slowly, which puts some pressure on consumer demand.
Second, rising export prices have impacted the volume of goods being shipped. While raw material costs continued to climb—domestic 328 cotton prices rose to 22,600 yuan per ton in September, up 75.49% year-on-year, and polyester staple fiber prices increased by 21.33%—companies have been forced to raise product prices due to higher wages, trade tensions, and currency appreciation pressures. Some companies with weaker bargaining power have opted to breach contracts rather than absorb rising costs, which has reduced the overall impact of price increases on export value.
Looking ahead, we expect the export growth rate to continue declining in the fourth quarter. This is due to several reasons. First, rising raw material prices, particularly cotton, driven by reduced production, increased demand, and speculative hot money, have led to soaring costs, which weaken China’s competitive edge. Companies may either raise prices or lose orders, increasing the risk of order transfers and reducing export volumes. Second, the U.S.-China trade deficit widened significantly in August, reaching a record high and accounting for 60% of the total U.S. trade deficit. This could intensify pressure for renminbi appreciation. Third, the fiscal tightening in Europe is starting to affect domestic demand, which will further constrain import growth. Lastly, foreign trade barriers are becoming more severe, with recent U.S. legislation like the Toxic Substances Control Act and the Foreign Producer Legal Accountability Act serving as additional trade restrictions against Chinese exports.
Given these factors, we maintain a “neutral†rating for the industry. However, we recommend focusing on large export enterprises with strong market positions and stable order books, such as Luthai A, Huafu Spunbond, and Rebecca. These companies are currently rated “overweight†in our investment analysis. (Tianxiang Investment Consultant Co., Ltd.)