Peak season may perform badly after demand pulled forward

Sep and Oct are traditional peak season for textile market. By convention, domestic and export orders will gradually improve from late-Aug and there will be a lot of orders both export and domestically to be placed in Sep-Oct. However, this year seems to sell a different story. There are no signals for peak season temporarily by now and the performance is even worse than the off-season level. Some market players start worrying later demand.

The appearance of peak season was earlier estimated to be worse than anticipated this year and such expectation is intensified based on the status quo. It may even perform very poor this year, which may be the worst peak season in recent years based on the following points:

Firstly, surging sea freight and tight containers disrupted the placement tempo of export orders in 2021. Some export orders in the second half of 2021 for the Christmas Day have been pulled forward. It was reported that there were few purchasers of Christmas items in Yiwu small commodity market now. Some suppliers expressed that many purchasers successively placed orders from Feb and Mar, so peak season came earlier. The orders in May and Jun could be 8-10 million Yuan, and many hot products were sold out. The procurement of Christmas items came to an end in advance. Affected by the pandemic, supply and demand on container marine market was seriously unbalanced with short dock workers, congested ports and falling circulation efficiency of vessels. The shipping space has been tight since the second half of last year. Short containers have not been eased by now and tight shipping capability even intensified. The Christmas goods are time-efficient, which will be hard to sell after the specific time. Therefore, many overseas customers and foreign trade companies in China placed orders and made delivery in advance, which indirectly reflected the status quo on export market. It is supposed to see intensive orders for Christmas goods now, while the placement tempo has been apparently ahead of schedule this year due to high sea freight and tight containers. Players are busy in delivering orders taken earlier, while new orders are scarce, which may remain limited in the following 2 months. It will be not wise to place too many orders for Christmas goods now. If the delivery and sales are stifled, seasonal Christmas goods will be unsold stocks at hand.

Secondly, domestic demand in China in the second half of year has been pulled forward. Many fabric mills and traders tried their best to control stocks low in the first half of 2020 due to the outbreak of the pandemic, while it was hard to find available goods in the second half of 2020 after demand hiked. Many players prepared many stocks in advance in 2021 in expectation of moderate cost and demand. As a result, stocks of fabrics have been very high among producers and traders. Sep and Oct, traditional domestic peak season, may see players focus on digesting the stocks that accumulated before.

All in all, many export orders have been placed in advance due to the exorbitant freight costs and tight containers, especially orders for seasonal Christmas goods. Players are anticipated to focus on delivering later. Domestic orders witness similar situation. Many participants have prepared goods in advance. Stocks of downstream market including fabric mills, traders, printing and dyeing plants have been high. Players become more cautious with the spread of the Delta Variant and see obviously falling new orders, worrying peak-season demand to be worse than anticipated. Thus, the operating rate of downstream plants drops rapidly, which may continue in short run. The coming peak season may witness poor performance.