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ReturnChen Yiqing：Silk industry has an optimistic look into the future(3)
Author：
admin
PublishDate：
2006-02-07 10:41:00
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561
(The author is a famous industry veteran, expert of China Silk Association and Ministry of Commerce, former vice-president of China National Silk Imp. & Exp. Corporation)
3. Unfavorable factors for market sentiment
Despite of price ups and downs, industry insiders have an opinion that it is most important to remain a relatively stable environment. However, there is still some distance from becoming reality. Prices at continuously high levels appear to be stimulating production and constraining consumption. We still see some unfavorable factors likely to affect later price movement, even the movement after the second half of next year, namely：
⑴Anticipation for increased spring cocoon output of next year
Despite of some unfavorable factors influencing the spring cocoon production, including the tight silkworm egg supply situation, the record-high cocoon purchasing price this year are still expected to motivate farmers to plant more mulberry trees and raise more silkworms. The result is the anticipation for the increased spring cocoon output of next year
⑵Anticipation for the reduction of materials demand and the improvement of supply and demand balance
Although in nationwide silk processing enterprises had some ability to absorb high prices, the industry endured more pressure under the increasing cost when price inversion happened. Some enterprises responded to such high prices by decreasing production and even using substitutes. The changes of silk production structure and consumption structure led to the fall of materials demand. As a result, we can see an expected balance between supply and demand.
⑶Anticipation for slowed increase rate of export toward the second half of this year and first half of next year
China’s silk industry achieved a high rate of export growth, however, silk materials export showed some sign of slowing down since late 2005. Moreover, silk exports to main destination markets, especially to the USA, India, Japan and Korea, decreased in proportion to total silk product exports. So there are some bearish factors that we make into consideration.
·Global market’s identification degree of China’s cocoon and silk supply and demand and prices, especially the over-speculation after November, probably make customers keep sideline and watch.
·The result and influence of anti-dumping investigation on silk fabric exports by Indian government is note-worthy. It will directly affect the silk exports to India.
·Further export limitation actions taken by Turkey and Mediterranean countries due to their political and economic relations with the EU will be taken into account.
·The persistence of an expected appreciation in the yuan will affect the silk exports. Limited by current conditions, silk enterprises can’t do well in avoiding relevant risks. Moreover, silk enterprises avoided the pressure by signing short-term contracts and raising prices. Such action limited the export expansion.
·Global demand is relatively stable these years. China’s silk exports have experienced an increase rate over 10 pct for consecutively three years. And the base figure is relatively large. As a result, the increase rate of export is expected to drop in the coming year.
The above factors are likely to dampen the market sentiment toward the next year.
( To be continued)
3. Unfavorable factors for market sentiment
Despite of price ups and downs, industry insiders have an opinion that it is most important to remain a relatively stable environment. However, there is still some distance from becoming reality. Prices at continuously high levels appear to be stimulating production and constraining consumption. We still see some unfavorable factors likely to affect later price movement, even the movement after the second half of next year, namely：
⑴Anticipation for increased spring cocoon output of next year
Despite of some unfavorable factors influencing the spring cocoon production, including the tight silkworm egg supply situation, the record-high cocoon purchasing price this year are still expected to motivate farmers to plant more mulberry trees and raise more silkworms. The result is the anticipation for the increased spring cocoon output of next year
⑵Anticipation for the reduction of materials demand and the improvement of supply and demand balance
Although in nationwide silk processing enterprises had some ability to absorb high prices, the industry endured more pressure under the increasing cost when price inversion happened. Some enterprises responded to such high prices by decreasing production and even using substitutes. The changes of silk production structure and consumption structure led to the fall of materials demand. As a result, we can see an expected balance between supply and demand.
⑶Anticipation for slowed increase rate of export toward the second half of this year and first half of next year
China’s silk industry achieved a high rate of export growth, however, silk materials export showed some sign of slowing down since late 2005. Moreover, silk exports to main destination markets, especially to the USA, India, Japan and Korea, decreased in proportion to total silk product exports. So there are some bearish factors that we make into consideration.
·Global market’s identification degree of China’s cocoon and silk supply and demand and prices, especially the over-speculation after November, probably make customers keep sideline and watch.
·The result and influence of anti-dumping investigation on silk fabric exports by Indian government is note-worthy. It will directly affect the silk exports to India.
·Further export limitation actions taken by Turkey and Mediterranean countries due to their political and economic relations with the EU will be taken into account.
·The persistence of an expected appreciation in the yuan will affect the silk exports. Limited by current conditions, silk enterprises can’t do well in avoiding relevant risks. Moreover, silk enterprises avoided the pressure by signing short-term contracts and raising prices. Such action limited the export expansion.
·Global demand is relatively stable these years. China’s silk exports have experienced an increase rate over 10 pct for consecutively three years. And the base figure is relatively large. As a result, the increase rate of export is expected to drop in the coming year.
The above factors are likely to dampen the market sentiment toward the next year.
( To be continued)
