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The impact of the Red Sea crisis on China's cotton and textile industry?
Release date: [2024/3/12] Read total of [55] times

The industry generally believes that the impact of the Red Sea crisis on China's cotton and textile industry is "short and long", for the following reasons:

First, the Red Sea crisis not only led to Southeast Asia, South Asian countries textile/clothing exports to Europe have been greatly affected, and some countries to purchase Brazil, the United States cotton, African cotton and other port volume decline, the direct result is that Europe, the United States and other countries clothing enterprises/retailers directly order Chinese processing enterprises. Some export orders from Bangladesh, Indonesia and other countries have to be returned to China due to raw material problems and transportation problems. For export enterprises in Southeast Asia/South Asia countries, if the detour to the Cape of Good Hope, not only the freight is sharply increased, the profit is significantly decreased, and the delivery time is very uncertain.

Second, although the Red Sea crisis has also had a certain impact on China's textile clothing exports to Europe (Europe and the Middle East routes have appeared empty flight phenomenon), on the one hand, the Central Europe train can be substituted for sea transport, and the space of the Central Europe train has been booked in advance; On the other hand, the European market accounted for the proportion of China's textile and garment exports continued to decline (14.4% in 2022, and China's cotton knitting and woven clothing to the EU fell 30.9% and 20.7% respectively from January to October 2023). Overall, due to China's round production of more than 880,000 tons of reserve cotton in 2023 (imported cotton accounts for a relatively large proportion), port cotton inventory is sufficient (American cotton, Brazilian cotton transport by the Red Sea crisis is not prominent), so domestic cotton, imported cotton supply is sufficient, and export orders (including traceable orders) are sufficient.

Third, in the medium and long term, the Red Sea crisis is not conducive to China's cotton consumption, textile and garment exports. First of all, the Red Sea crisis led to the shortage of containers and port congestion, the shortage of empty boxes may spread to Asian ports in mid-to-late January at the fastest, the empty boxes needed for China's export season may be trapped in other places (such as textile and clothing exports, cotton import containers supply is insufficient), ships in the Asian region will also face the challenge of empty box availability; Secondly, affected by the tension in the Red Sea region, market freight rates such as North American routes and Persian Gulf routes will continue to rise comprehensively, and the cost of China's textile and clothing exports and cotton imports will rise; Third, the China-Europe freight train only temporarily plays a substitute role for the Red Sea route, and the carrying capacity is still not comparable to sea transport. At present, the cabin in January and February has been booked in advance by European customers, but at the same time, it restricts the export demand of textiles and clothing to other countries and regions, and the difficulty of contract performance has increased.

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