Search
Info Center
Home > Info Center > CCSE Review
Return
ReturnChen Yiqing：Silk industry has an optimistic look into the future(2)
Author：
admin
PublishDate：
2006-01-24 13:38:00
Hit：
535
(Chen Yiqing, famous industry veteran, expert of China Silk Association and Ministry of Commerce, former vice-president of China National Silk Imp. & Exp. Corporation)
Dated on Dec. 15,2005
2.Causes of the price hike
⑴In the first half of this year, electronic cocoon and raw silk price movement in China Cocoon & Silk Exchange showed a relatively stable trend and the prices didn’t seem high according to the market situation that time；With the changes of supply and demand complexion, prices hiked from July, then we saw a more obvious uptrend from October；There was abnormal price boom after November came mainly driven by speculation.
⑵ Cocoon price had a more significant increase than raw silk price in the first half of this year, and the average price of dried cocoon and raw silk reached 58400 yuan per ton and 178,400 yuan per ton respectively；Raw silk price gradually caught up with the rise of cocoon price after July；After October came, cocoon price again rose more sharply than raw silk prices, and price inversion has occurred.
⑶According to reports, physical prices seemed higher than electronic prices in China Cocoon & Silk Exchange, and it showed that physical rise pushed up electronic prices this year. As a matter of fact, rises of spot prices were based on the market supply and demand.
⑷Market and un-market factors, coupled with soared cost and expenses, led to high prices for cocoon purchase, especially for autumn cocoon purchase. It showed its reasonability in terms of the fact that cocoon and silk prices rose consecutively and gradually moved at high levels (excluding the price surge froth due to speculation factor during the later period).
⑸ Rising cocoon and silk prices at domestic market matched the real wishes to increase industry economic efficiency. Silk enterprises that participated 2005 Guangzhou Fair had a general consensus that current silk export prices had got rid of the shadow of low prices and little profit and favored the industry chains.
Policy factors, speculation and primarily market supply and demand determined ups and downs of cocoon and silk prices as well as changes of price movements. Moreover, speculation behaviors during the later period of the second half of this year just used and exaggerated some factors hidden in supply and demand situation. Cocoon and silk prices hike after November, from the view of fundamental analysis, is the result of the widening imbalance of supply and demand occurred from the second half of 2003.
⑴Demand showed a consecutively significant increase.
Net silk exports rose above 10 pct for three consecutive years from 2003, said Customs data. Meantime, domestic silk consumption improved by a big margin these years. Increasing silk consumption both at home and broad led to a rise in demand. From 2003 to 2005, the silk consumption for domestic and global markets reached 94,700 tons, 1,053,000 tons and 1,18,000 tons respectively.
⑵ Cocoon production couldn’t keep pace with the demand increase.
Production regions including Guangxi and yunnan enjoyed a significant increase for cocoon output, however, east China and other middle and west regions showed only a small increase or slight decrease these years. So cocoon output including tussah cocoon were a bit higher in nationwide, indeed, a slight decrease in some years.
According to data from China National Silk Imp. & Exp. Corporation, China’s silkworm cocoon totaled 500.4 million tons (down 8.52 pct year-on-year), 550.1 million tons (up 9.93 pct year-on-year) and 584.2 million tons (up 6.86 pct year-on-year) in 2003, 2004 and 2005 respectively, while the corresponding cocoon demand reached 580 million tons in 2003, 640 million tons in 2004 and 710 million tons in 2005 respectively. From here we can see that the supply gap is gradually and imbalance between supply and demand is growing year after year.
⑶High-quality cocoon and silk has a fast-growing demand.
The modernization of silk equipments, the popularization of fashion and the extending of consumption field caused a growing demand for high-quality cocoon and silk products. On the other hand, China’s cocoon and silk production couldn’t keep pace with the increasing demand of recent years, especially this year.
⑷The elasticity of process capability pushed prices up.
The state government has adjusted total quantity of process capability. But it’s worth considering how size to be taken. Citing the reviewed quantity of filature as an example, based on conservative estimate of current cocoon demand and normal operation time of filature enterprises, the cocoon supply gap will reach 50 pct every year. When the market consumption is performing better, the soaring demand for cocoon materials, coupled with cocoon stocks in traders and mills, caused prices higher and higher；When the market consumption falls, over-stocks of cocoon and silk drove low prices down. Moreover, there are many filature enterprises without production permit. The elasticity of process capability fuels the price movement.
Dated on Dec. 15,2005
2.Causes of the price hike
⑴In the first half of this year, electronic cocoon and raw silk price movement in China Cocoon & Silk Exchange showed a relatively stable trend and the prices didn’t seem high according to the market situation that time；With the changes of supply and demand complexion, prices hiked from July, then we saw a more obvious uptrend from October；There was abnormal price boom after November came mainly driven by speculation.
⑵ Cocoon price had a more significant increase than raw silk price in the first half of this year, and the average price of dried cocoon and raw silk reached 58400 yuan per ton and 178,400 yuan per ton respectively；Raw silk price gradually caught up with the rise of cocoon price after July；After October came, cocoon price again rose more sharply than raw silk prices, and price inversion has occurred.
⑶According to reports, physical prices seemed higher than electronic prices in China Cocoon & Silk Exchange, and it showed that physical rise pushed up electronic prices this year. As a matter of fact, rises of spot prices were based on the market supply and demand.
⑷Market and un-market factors, coupled with soared cost and expenses, led to high prices for cocoon purchase, especially for autumn cocoon purchase. It showed its reasonability in terms of the fact that cocoon and silk prices rose consecutively and gradually moved at high levels (excluding the price surge froth due to speculation factor during the later period).
⑸ Rising cocoon and silk prices at domestic market matched the real wishes to increase industry economic efficiency. Silk enterprises that participated 2005 Guangzhou Fair had a general consensus that current silk export prices had got rid of the shadow of low prices and little profit and favored the industry chains.
Policy factors, speculation and primarily market supply and demand determined ups and downs of cocoon and silk prices as well as changes of price movements. Moreover, speculation behaviors during the later period of the second half of this year just used and exaggerated some factors hidden in supply and demand situation. Cocoon and silk prices hike after November, from the view of fundamental analysis, is the result of the widening imbalance of supply and demand occurred from the second half of 2003.
⑴Demand showed a consecutively significant increase.
Net silk exports rose above 10 pct for three consecutive years from 2003, said Customs data. Meantime, domestic silk consumption improved by a big margin these years. Increasing silk consumption both at home and broad led to a rise in demand. From 2003 to 2005, the silk consumption for domestic and global markets reached 94,700 tons, 1,053,000 tons and 1,18,000 tons respectively.
⑵ Cocoon production couldn’t keep pace with the demand increase.
Production regions including Guangxi and yunnan enjoyed a significant increase for cocoon output, however, east China and other middle and west regions showed only a small increase or slight decrease these years. So cocoon output including tussah cocoon were a bit higher in nationwide, indeed, a slight decrease in some years.
According to data from China National Silk Imp. & Exp. Corporation, China’s silkworm cocoon totaled 500.4 million tons (down 8.52 pct year-on-year), 550.1 million tons (up 9.93 pct year-on-year) and 584.2 million tons (up 6.86 pct year-on-year) in 2003, 2004 and 2005 respectively, while the corresponding cocoon demand reached 580 million tons in 2003, 640 million tons in 2004 and 710 million tons in 2005 respectively. From here we can see that the supply gap is gradually and imbalance between supply and demand is growing year after year.
⑶High-quality cocoon and silk has a fast-growing demand.
The modernization of silk equipments, the popularization of fashion and the extending of consumption field caused a growing demand for high-quality cocoon and silk products. On the other hand, China’s cocoon and silk production couldn’t keep pace with the increasing demand of recent years, especially this year.
⑷The elasticity of process capability pushed prices up.
The state government has adjusted total quantity of process capability. But it’s worth considering how size to be taken. Citing the reviewed quantity of filature as an example, based on conservative estimate of current cocoon demand and normal operation time of filature enterprises, the cocoon supply gap will reach 50 pct every year. When the market consumption is performing better, the soaring demand for cocoon materials, coupled with cocoon stocks in traders and mills, caused prices higher and higher；When the market consumption falls, over-stocks of cocoon and silk drove low prices down. Moreover, there are many filature enterprises without production permit. The elasticity of process capability fuels the price movement.
