Operation Analysis of China’s Technical Textiles Industry in the First Half of 2018

In the first half of 2018, the global economy continued to recover. China has actively promoted supply-side structural reforms, and economic development has maintained stable growth. However, protectionism in the global trade sector has risen, and oil prices have risen. The industrial textile industry faces a more favorable but complex environment. In the first half of 2018, the industrial added value growth rate of China’s technical textiles industry reached 7.8%, 3.8 percentage points faster than the same period of last year. And the main business income and total profit of enterprises above designated size increased by 7.75% and 1.39% respectively.

According to the research of China Nonwovens & Industrial Textile Association (CNITA), the business index of technical textiles industry is 77.9 in the first half of 2018, and it is expected that the business index of the second half is 71.5, down slightly compared with 2017.

I. Production Maintains a High Growth Rate
According to the association’s research, the demand index of the domestic market in the first half of the year was 72.0, and the demand index of the foreign market was 65.1. The change in the global trade situation had a certain negative impact on the demand for technical textiles in overseas markets. According to the National Bureau of Statistics, by the main products, the industrial output of China’s nonwovens reached 1.85 million tons in the first half of the year, seeing a year-on-rear rise of 8.24%. While the outputs of tire cord fabrics was 315,200 tons, down 3.38% year-on-year. As the main raw material of technical textiles, after the adjustment in 2017, the output growth rate of the nonwovens has exceeded than that of 2016, but there is still a certain gap with the high growth rate of 2015.

II. The Economic Benefits are Improved but the Differentiation is Intensified
According to the National Bureau of Statistics, in the first half of 2018, the main business income and total profit of enterprises above designated size in the industrial textile industry reached about CNY 128.91 billion and CNY 6.58 billion, up 7.75% and 1.39% respectively. The growth rate of income was at a relatively high level in the textile industry. And the industry’s average rate of profit was 5.1%, down 0.32 percentage point year-on-year. The gross profit rate was 13.15, down 0.56 percentage point year-on-year; the enterprises operated in deficit were 14.66%. According to the trace analysis of the association’s member enterprises, the main business income and total profit of the flagship enterprises of the association increased by 14.11% and 2.65% respectively in the first half of 2018, and the profit rate was 7.06%.

In the first half of the year, the growth rate of industrial profits resumed a slight increase. The main reason was that some technical textiles like filtration and separation textiles, geotextiles, protective and safety textiles and transport textiles has maintained a higher growth momentum. The main business income and total profit increased by 9.02% and 30.34% respectively. And the profit rate of technical textiles industry reached 7.11%, which ranked the first in the textile industry.

The high prices of major raw materials in the technical textiles industry are still putting a lot of pressure on the overall profitability of the industry. In the first half of 2018, the prices of main raw materials like polyester staple fiber, polyamide fiber, and polypropylene fiber were relatively higher than that of 2017.

In the first half of the year, the main business income of nonwovens enterprises above designated size reached about CNY 62.23 billion, up 7.42% year-on-year; and their total profit were CNY 3.1 billion, down 0.37% year-on-year. From the perspective of production, sales and export delivery values, though the raw material prices maintained a sharp rise, it was difficult for companies to transfer the pressure of rising costs to downstream users. The rise in raw material prices and fierce competition in the technical textiles industry made some enterprises more difficult to operate.

The main business income of the rope, cable, and hawser increased by 5.79%, while their profit decreased by 3.63%. While the main business income of the textile belt and tire cord fabrics increased by 14.04%, which ranked the first in the industry, and its profit decreased by 1.96%. The main business income of canvas and tarp textiles in the first half of the year was basically unchanged with that of last year. However, the rising prices of raw materials and the gradual tightening of environmental protection policies have led to the continuous increase in the cost of industrial enterprises. The industrial profit has dropped by 24.87%, and the profit rate has also dropped by 1.39 percentage points.

III. Exports Grows Steadily
According to the National Bureau of Statistics, in the first half of the year, the export delivery value of enterprises above designated size increased by 5.57% year-on-year, of which the export delivery value of nonwovens increased by 14.38%, and the growth rate increased by 7.89 percentage points compared with the same period of last year. Based on the data, the importance of overseas markets for the steady development of the industry is increasing.

IV. Forecast
In the second half of 2018, China will upheld the underlying principle of pursuing progress while ensuring stability, risen to challenges, pioneered and pushed ahead. However, various challenges such as the rise in raw material prices and the risks brought by Sino-US trade frictions will have a greater negative impact on the development of the industry. It is expected that the main indicators of the technical textiles industry will maintain a low- and medium-speed growth, the industry’s profitability will be reduced, and the differentiation between business operations will be more obvious.