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The epidemic in India is out of control, a large number of textile and apparel orders from Europe and the United States are transferred to China

June 10, 2021
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India is experiencing a new outbreak of the new crown epidemic. With vaccine shortages, virus mutations, and shortages of medical resources, India has fallen into a state of emergency. The country’s escalation of the epidemic has limited impact on the global supply chain, and China’s textile industry may benefit in the short term. At present, many European and American textile orders have accelerated to the Chinese market.

India's counter-attack caused a sharp increase in foreign trade risks

 

The second wave of the epidemic in India has intensified. Since mid-April, there have been more than 200,000 new confirmed cases of the new crown pneumonia epidemic in India in a single day, and the number of deaths has also shown an upward trend. The relevant data has far exceeded the peak of the first wave of epidemics in 2020. On May 1, the number of newly confirmed cases in India reached 402,000 in a single day. At present, the severity of the epidemic in India has surpassed that of the United States at the end of last year, and it has brought the risk of further aggravation of the epidemic to countries around the world.

 

Official data show that in 2020, China-India trade volume was 87.59 billion U.S. dollars, China's exports to India were 66.73 billion U.S. dollars, and its imports from India were 20.86 billion U.S. dollars. The raging epidemic in India will undoubtedly have a serious impact on foreign trade and freight forwarders engaged in Sino-Indian trade, because India has already had news of a shutdown in the port and logistics industry.

 

Kandla Port, the nearest container port to New Delhi, recently announced that due to the sudden increase in COVID-19 cases, all terminal operators in Kandla Port have unilaterally decided to close terminal operations on the weekend starting from April 24 in order to prevent the virus infection chain. , Until further notice.

 

This is the first port to announce partial closure of terminal operations. In view of the nearly out of control epidemic, other Indian ports are likely to be forced to stop by the epidemic one after another. In view of this, domestic logistics companies have issued notices to suspend the collection and transportation of goods.

 

The epidemic in India is out of control, a large number of textile and apparel orders from Europe and the United States are transferred to China.

 

At the same time, the suspension and blockade have severely affected the survivability of Indian companies. In addition, the rupee exchange rate against the US dollar has fallen sharply, transportation has been blocked, and the abandonment of goods has emerged. Recently, foreign trade companies exporting to India need to always pay attention to the safety of goods and freight.

 

May to June overseas return orders or further growth

 

However, for the Chinese economy, the Indian epidemic has also brought opportunities to some industries. Among them, my country's textile industry may usher in short-term benefits.

 

India is the world's largest cotton producer and the world's second largest textile manufacturer and exporter. Its yarn production capacity accounts for 22% of the world. Since the second half of last year, the epidemic in India has gradually heated up. Many large export-oriented textile companies cannot guarantee normal delivery due to the epidemic. To ensure that the supply is not affected, European and American retailers have transferred a number of orders originally produced in India to China for production. , Which stimulated my country's textile and apparel exports. From January to December 2020, national textile and apparel exports totaled US$291.22 billion, a year-on-year increase of 9.6%. Now that the epidemic in India has broken out again, it will once again promote the transfer of orders to my country's textile industry.

 

Affected by the counter-attack of the epidemic, India's labor shortage and increasing restrictive measures may further impact the garment and textile industry. Several analysts from upstream and downstream companies in the textile and apparel industry chain and securities firms said that Indian textile companies cannot guarantee normal delivery, and a large number of European and American textile orders will be transferred.

Data show that in the first quarter of this year, China’s textile and apparel exports were US$65.1 billion (approximately 421.4 billion yuan), a year-on-year increase of 44%; among them, textile exports were US$31.81 billion (approximately 206 billion yuan), a year-on-year increase of 40.3%; clothing exports 33.3 billion US dollars (approximately 215.5 billion yuan), a year-on-year increase of 47.7%.

 

At the same time, Indian cotton is currently in the planting season, and the intensification of the new crown pneumonia epidemic has hindered the agricultural planting process. my country's industry has seen expectations that Indian orders will return to China. Affected by this, the domestic cotton market has recovered significantly recently. CITIC Securities' research report on April 25 pointed out that affected by bullish news, overall, cotton prices are expected to be on the strong side.

 

At present, many Chinese textile companies have received return orders, and overseas return orders from May to June this year are expected to increase further.

 

The person in charge of a large-scale yarn enterprise in Jiangsu said not long ago that not all return orders are placed by Indian customers, but by European and American customers directly, or customers in Southeast Asia may change hands.

 

As the leading domestic textile company, Luolai Life may benefit from the transfer of a large number of orders. According to its quarterly report for 2021, the company's operating income was 1.319 billion yuan, a year-on-year increase of 47.69%; the net profit attributable to the parent was 183 million yuan, a year-on-year increase of 156.15%.

 

Blum Oriental, the domestic leader in color spinning, showed strong growth in the first quarter due to the recovery of overseas orders and the expansion of production capacity. According to the company's performance forecast for the first quarter of 2021, net profit attributable to the parent increased by 135 million yuan to 164 million yuan, an increase of 190% to 230% year-on-year.

 

An insider of Blum Oriental said that the company accepted a wave of backflow orders in the second half of last year. Since the fourth quarter of last year, the company's order situation has been very good, and it is close to full production. According to the order scheduling situation, it is prudently estimated that the performance in the first half of this year will achieve a significant increase compared with the same period in 2020, which is a relatively low base, and even better than the same period in 2019 before the epidemic.

 

Some analysts pointed out that the rebound of the epidemic in emerging markets may allow China to maintain its export share for a period of time. If the epidemic in India, Brazil, Southeast Asia and other countries rebounds again, the industrial production and exports of these countries may be affected, which will benefit countries with better epidemic control. For example, since last year, China has been one of the countries with the best epidemic control in the world. Among Southeast Asian countries, Vietnam has also achieved better epidemic control. This makes China and Vietnam's export growth significantly better than other Southeast Asian countries.

 

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