Exchange Rate Volatility Hits Cotton Yarn Importers Afraid Of Being Shuffled

The good news of the recent depreciation of the RMB exchange rate has given the domestic textile industry a chance to breathe.

In recent two years, due to the restrictions on cotton prices and labor, China has been

The industrial plight is getting more and more difficult.

It is understood that China's yarn imports reached a high level in 2013 and 2014, and the annual import volume was more than 2 million tons. Customs data show that in 2015 1-6 cotton yarn imports amounted to 1 million 184 thousand tons, of which 1-4 months from India, Pakistan and Vietnam three countries imported cotton yarn quantity has exceeded 2011 annual import volume, import momentum is strong.

After the depreciation of the RMB exchange rate, the pressure of subsequent orders for importers to face the market is facing.

According to the 90 day letter of credit, when the original order was made, the exchange rate was calculated at 6.2, the current exchange rate rose to nearly 6.4, and the cost of import yarn remittance rose by several hundred yuan.

Domestic and foreign cotton yarn prices are further integrated, the advantages of outer yarn are gone, import yarn trade default phenomenon is likely to increase, importers fear a new round of shuffle.

A certain Guangdong

Industry insiders said that before the RMB exchange rate went down, the price of domestic and imported low price yarn was basically flat with the continuous decline of domestic cotton prices. The yarn has no advantages in terms of price or quality, and the growth rate of imported yarn has been curbed and the sales will be in a predicament due to the decline in the exchange rate adjustment.

In the face of the risk of exchange rate adjustment, can cotton yarn importers be caught?

Wu Faxin, general manager of the Greater China region of Guangzhou's import and Export Trading Co., Ltd., has written that with the increase of the RMB exchange rate and the fluctuation of the market, the "two-way fluctuation" will become normalized. The exchange rate will fall to 7 in the future, and traders must be fully prepared for this.

First of all, it suggests that it should do well in anticipation of the balance of foreign exchange or reduce the risk exposure of foreign exchange as soon as possible; secondly, establish a "currency to rush position" lock rate in the international money market, or advance the settlement of foreign exchange through the "Forfaiting" way, and pass on the exchange rate risk.

Recently, the northern textile enterprises association of India said that the cotton mills affiliated to the northern textile enterprises association in India consider reducing production and closing the factory one day a week. The main reason for this decision is high yarn stock and tight funds.

The Spinning Association of southern India also agreed that it would be closed for a week from August 17th.

Sales and supply, so as to avoid some traders further lower the price of yarn.

The depreciation of the RMB exchange rate will make the foreign yarn production enterprises worse and worse. It will boost the domestic cotton yarn in the short term. But in the long run, the domestic textile enterprises need to practice their skills and improve the quality and grade of the products if they want to really change the passive situation.