Download Power Point Presentation

Expand Our Market with Quality Cotton/Yarn
Briefing for CCI Delegation
October 9th 2016, Shanghai
Outline
1. China’s Economic Review
2. China’s Cotton and Textile Industry
3. CCI Program in China
4. Appendix: The Status of MMF in China
2
China’s Economic Review:
The Good News and The Bad News
The Good News
4
(1)
New Industries Are Emerging In China
Internet Plus and
E-Commerce
High-Tech Industries Are
Growing Rapidly
New
Industries
Advanced Equipment
Manufacturing Industry
Alternative/New Energy
5
(2) Traditional Industries Are Upgrading
Manufacturing industries
• Strive to upgrade through innovation and
optimizing resource allocation
However, traditional industries are lagging behind and
shrinking
• High-pollution, high-energy consumption
• Financial debt, high costs, overcapacity,
and warehouses
6
(3)
Simplified
administrative
procedures
Market Forces Start To Play A Dominant Role
Delegating
power to local
levels
Reform of StateOwned Enterprises
Promoting private
Industries
High growth in the
service sector
• Economic growth is gradually shifting from government-driven to market-driven.
The Bad News
8
(1)
The Chinese Economy Is Facing A Downturn
According to Conference Board, China’s GDP has increased by only 4%.
The economic downturn is the result of several factors.
Bird’s Eye View
•From 2008 to 2014, Total Factor Productivity (TFP) has decreased. It is equivalent to
only 1/8th of the US and Europe’s TFP.
View From The Trenches
• Traditional manufacturing industries are lagging behind
• Weak market
• Decreasing profits
• Costs are going up
• Difficult for private enterprises to get funded; financing towards SOEs but not
POEs
• Unfavorable public opinions for MNCs and POEs, therefore their confidence in the
economy and the government is deteriorating.
9
(2)
The “Master” vs. The “Market”
Reform Is Stalled
The economy relies on a stimulus plan and credit. The risks are high.
China’s economy is using a macro-level government plan to replace the market forces.
Plays an important role
Lost Confidence
Reform stopped
Macro Plan
POEs
SOEs
10
SOEs advances at the
expense of the POEs
• One Belt One Road,
• Beijing-TianjinHebei
• Yangtze River
Economic Belt
(3)
Reform vs. Re-Form
The 4 Challenges of the Economy:
• Debt
• Overcapacity
• An aging population
• Environmental pollution
Re-form
Reform
vs
More Stalinist,
Strong Party and SOE,
Smaller POE
More Market-Driven
11
Our Understanding of
China’s Cotton and Textile Industry
Facts Finding Trips in June and August, 2016
• NCC Leadership Delegation Trip
Time: 28th June-2nd July, 2016
Place: Wuhan, Xiantao and Xiaogan,
Hubei Province
Urumqi
• 2016 Facts Finding Trip
3rd
Wuhan
8th,
Time: August
–
2016
Place: Urumqi and Korla,
Xinjiang Autonomous Region
13
Key Findings – 1. A Tough Cotton Market
Weak Market
•
Strong Demand
•
•
The low quality of cotton does
not meet the demands of
upgrading the textile industry
The textile industry is crying out
for high quality cotton
With the slow down of China’s
economy and weak demand of the
international market, the demand for
cotton is weak
Risk of China’s “Target Price Policy”
•
China’s Cotton
Industry
Insufficient Supply
•
•
The difficulty of increasing the farmers’
income and high cost of production led
to a shrinking in the cotton plantation
and decreased its overall production.
Short supply of imported cotton due to
the TRQ limitation and no STRQ issued
in 2016
The Chinese government looks for
subsidiary policies to protect the
interests of farmers, while protecting the
jobs in the textile industry. And these
policies may be very risky because of
unstable financial policies.
Environmental Constraints
•
14
Natural resources are limited, and
the environment is very sensitive,
especially in Xinjiang.
2. Dynamic Textile Industry
Go West
Go Out
• According to CNTAC, by the end
• Guidance on supporting the
of 2014, there were 2,600
development of the Xinjiang
Chinese textile industries that
textile and garment industry
had setup the outbound textile
issued by the State Council in
plants, trade or design centers.
Industry
June 2015.
• The One Belt and One Road
• The Chinese government plans
Upgrading
Initiative will further promote
to invest RMB 20 billion to
this momentum.
establish a 20-million spindle
textile capacity in ten years
• China’s 13th Five Year Plan aims to
in Xinjiang.
strongly promote industry upgrading
and quality improvement
China’s Cotton Reserve Will Become History
No Fresh Cotton into the
Reserve
The Tightening Central
Budget
Textile Industry Seeks
High Quality Cotton
Extension of the Auction
The period extended to the
September 30th and up to an
additional 0.63 MMT of reserved
cotton will be offered to the
auction. So the total amount of
reserved cotton provided during
the auction will be 2.63 MMT in
2016.
New Cotton in October: The price for
new cotton may decrease to RMB
14,500
Xinjiang Target Price in March, 2017:
It may get lower, which may decrease
the motivation to grow cotton.
2017 National Reserve Auction in
April- May
Note: If the national reserve continuously releases 3 MMT in 2017, when considering the strategic reserved
cotton in China is estimated to be at 3 MMT, then, after 2018, China’s cotton reserves will become history.
2017 and Beyond
Gap
Supply
• 4.5 MMT Cotton
Production
• 894,000 MT
Imported Cotton
Demand
• 7.8 MMT Textile
Industry Usage
• China will again face 2 challenges that have spanned for decades:
1) Quantity of the cotton supply is not enough
2) Quality of the cotton supply is not good enough
• Solution: International high quality cotton and yarn
CCI Program in China
Four Pillars of Collaboration to Promote US Cotton/Yarn
Promotion
Program
Government
Relations
Reputation Building
Cotton USA
Media
Relations
18
Licensee
Relations
CCI’s Engagement Programs in 2016
March
•
Mr. Gary Adams and
Mr. Sledge Taylor’s
visited the CNTAC
Policy Forum with
CCA in Beijing
•
May
•
Mr. Bruce Atherley’s
participation in CCA
Cotton Industry
Summit in Wuhan
June
•
•
CCI was invited to
attend the CNTAC
forums in Xinjiang
•
October
September
•
August
NCC Leadership
Delegation headed by
Mr. Shane Stephens
Signing the LOI
between NCC and
CCTA
•
CCI Quality
Conference in
Shanghai, CNTAC
leaders participated
November
•
19
CCI Sourcing Summit
CCI 2016 Facts
Finding Trip to
Xinjiang
Keeping Momentum For New Wins in China
We are a high quality and stable cotton / yarn
supplier committed to China.
20
The U.S. Remains the Largest Supplier in 2016
From January to August, 2016, Chinese cotton imports totaled 2,729,493 bales (594,277 MT),
a decline of 46.44 percent y/y. U.S. cotton was ranked as the largest with a total quantity of 763,640
bales (166,263 MT), accounting for 27.98 percent of total imports. Australia was ranked as the
second supplier with a total quantity of 676,034 bales (147,189 MT).
Others
14.63%
Uzbekistan
14.55%
India
9.47%
United States
27.98%
Australia
24.77%
Brazil
8.61%
21
Thank You
Appendix:
The Status of Man-Made Fiber (MMF) In China
October 9th 2016, Shanghai
China Steadily Becomes the Biggest Chemical Fiber Producer
•
In 2015, the total worldwide annual fiber production was 90.59 million tons, and chemical fiber accounted for
73.4% (66.47 million tons). Source: Japan Chemical Fiber Association, 2015.
•
For the past 7 years, the worldwide amount of chemical fiber production has been increasing. In 2015, China’s
chemical fiber was 50.38 million tons, with a 7.35% year-on-year increase.
China’s production accounted for 75.79% of the global chemical fiber production.
US, 3.00%
Korea, 1.90% Japan , 1.10% W Europe, 3.30%
Others, 3.60%
ASEAN, 4.90%
India, 6.40%
China, 75.79%
24
Note: In definition, chemical fiber
includes the synthetic fiber (SF)
and man-made fiber (MMF). Since
both SF and MMF are the main
supporting raw materials to the
textile industry, in this research,
MMF refers to chemical fiber in
general.
The Rapid Growth of the MMF Industry in China
Synthetic
Fiber Production
MMF Production
MMT
60
20%
17.90%
48.7
15.55%
50
14.31%
13.87%
12.94%
40
38.1
30.9
30
20
Growth Rate
23.9
24.05
41.3
16%
44.3
12.50%
33.6
14%
12%
11.76%
27.3
18%
10%
7.9%
20.26
8%
5.5%
16.3
6%
4%
10
2%
2.30%
0
0%
2005
2006
2007
2008
2009
2010
2011
2012
(Source: The National Bureau of Statistics)
25
2013
2014
2015
MMF in the Textile Industry
• In the past 10 years, the MMF industry has seen rapid and robust development. Due to the limited
growth of natural fiber (i.e. cotton), MMF has now become the largest contributing factor to the
development of the textile industry. According to the “12th Five Year Plan of the Textile Industry
Development,” by the end of 2015, the total MMF processing volume should reach 39 million tons
and account for 76% of total textile fiber processing.
• According to the CNTAC, the ratio of the MMF processing amount vs. total fiber processing has
increased from 63.4% in 2005, to 70% in 2010 and has already reached 82.2% in 2015. Namely, the
cotton blending ratio was decreasing from 36.6% in 2005, to 30% in 2010 and to 17.8% in 2015.
26
The Growth of MMF Greatly Contributed to the Textile Industry
70.00MMT
60.00
Total Fiber Processing Volume
Synthetic
Fiber Production
MMF Production
Cotton
Production
Domestic
Cotton Production
Cotton Imports
50.00
43.10
41.30
40.00
36.20
35.30
20.73
20.00
24.14
24.53
50.00
53.00
48.72
43.90
38.37
33.90
30.90
26.90
48.50
41.60
37.10
31.95
30.00
45.90
60.00
27.47
16.65
10.00
7.53
5.71
3.64
2.57
0.00
2005
2006
7.62
7.49
2.46
2007
2.11
2008
6.38
1.36
2009
5.96
6.60
3.36
2.84
2010
2011
6.84
5.13
2012
6.30
6.18
5.61
2.44
4.15
2013
1.47
2014
2015
2020
Source: CNTAC, The National Bureau of Statistics and MOFCOM
•
With the stable and decreasing supply of cotton, the growth of the MMF industry has greatly contributed to the growth
of total fiber processing volume, which is a key indicator for textile industry development.
27
Price Comparison Between Cotton vs. MMF
Polyester Staple Fiber
RMB/Ton
Cotton 3128B
25000
23,697
19,447
20000
18,913
19,360
17,118
15000
13,096
13,768
13,447
13,089
12,832
13,236
12,885
7,133
6,662
2015
2016
13,059
10000
11,010
11,316
11,438
11,115
11,036
10,975
10,360
8,701
9,026
5000
0
2005
2006
2007
2008
2009
2010
2011
2012
Source: China Cotton Information Center
28
2013
2014
Brief Analysis Behind the Phenomenon
The short supply of cotton including the
insufficient cotton imports did not meet
the demands of upgrading the textile
industry, so they could only turn to
MMF as a solution.
MMF’s low price resulted from the falling
global oil price in recent years, as well as
cotton’s sustained high price; they both
stimulated the usage of MMF
The innovation and high performance of
MMF earned the support of consumers,
both from a physical (pursuit of practical
needs) and psychological (pursuit of
fashion) perspective.
29
Overcapacity of the MMF Industry
• However, the MMF industry has suffered overcapacity issues due to rapid expansion in the past
ten years.
2 Case Studies of Overcapacity in the MMF Industry:
 Shaoxing East Petrochemical Bankruptcy in
2015. As the leading enterprise in the PTA
sector, the bankruptcy indicated that the
polyester industry has fastened the
destocking process. By estimation, at
present, the excess capacity of the PTA
industry has reached 15 million tons.
 16 new polyester enterprises with 525,000
tons capacity shut down or went bankrupt
in the last 2 year, and the trend is
continuing. Actually, the operational rate of
the capacity has been less than 60% in the
whole new polyester industry.
30
Key Words of the MMF Industry in the 13th FYP
In September 2016, the CNTAC released the 13th Five Year Plan for the Chinese textile Industry.
According to the Plan, several key words can be observed:
Growth Rate:
Capacity:
•
•
•
During the 13th FYP period, the
average growth rate for the MMF
industry is set at 3.6% down from
9.2% during the 12th FYP. And the
production is projected to reach 55
million tons.
However, it should be noted that
this 3.6% is based on China’s
current great quantity which is
already the ¾ global production.
•
Development Outlook:
The fiber processing rates among apparel,
home textile and industrial textile during the
12th FYP was 46.8:28.6:24.6. During the 13th
FYP, the growth of industrial textile will be the
main driving force for MMF growth, and the
rate will increase to 33%.
Continue the de-stocking process:
encouraging the enterprises’ mergers and
acquisitions, as well as the orderly exit of the
market
31
•
•
The growth pattern towards to the
model of intellectual, green, and high
performance.
The potential of industrial textile will
be further released due to the
development of industries of
logistics, new energy,
infrastructure, etc.
Competition Exists Together With Cooperation
• It is the common fact that the development of the textile industry rests upon the resultant of
two resources: Cotton and MMF.
• The upgrading of the Chinese textile industry is the irreversible trend in the 13th FYP period,
which will call for high quality cotton and high-performance MMF to meet the demand. This
will further call for the cooperation instead of competition between cotton and MMF to jointly
promote transforming the textile industry from low-end to high-end.
• Therefore, high quality is the only way for cotton to stay in the market and stay alive. High
quality cotton is always winning the place in the market.
32