Profit of Chemical Fibre Industry Surges on Efficiency Improvement

According to data collected from 1935 statistics-worthy Chinese chemical fibre enterprises surveyed by National Bureau of Statistics of China, the total profits reached CNY8.066 billion in Jan. - May, 2010, up 200.08 per cent y/y, 234.78 percentage points higher than the Jan.-May 2009 period. Technology improvement and industrial structural adjustment played a very major role on profit growth.

After the crisis, promoting independent innovation, making breakthroughs in core technologies have been providing strong support for the transformation of the mode of growth of chemical fibre industry in China. The structure of Chinese chemical fibre sector was quietly undergoing a welcome change: from low-value-added strategy, to high-tech strategy. This, along with higher soaring cotton prices, led to improvement in the operating profit margins of most chemical fibre mills.

 

During Jan.-May period, enterprises in the chemical fibre sector saw their asset turnover ratio soared by nearly 13.34% y/y to 1.16, times-interest earned ratio soared by nearly 90.52% to 4.42, total assets contribution ratio increased by nearly 2.95% to 8.35% and profit margins increased by nearly 2.4% to 4.42%.

 

Source: National Bureau of Statistics of China, CNTAC Statistic Centre

 

The growth of profit margins of Chinese chemical fibre industry was also attributed to an increase in strong domestic demand, export recovery as well as higher market price of chemical fibre products.

 

Chemical Fibre Index shows that during Jan.-May period, Rayon Filament Yarn prices rose 17.36% to CNY34732/ton; Rayon Staple Fiber CNY 19532/ton, up 50.751%; Acrylic Staple Fiber CNY 21908/ton, up 62.16%; Polyamide DTY CNY 27765/ton, up 45.35%; Polyamide FDY CNY 26369/ton, up 58.92%; and Polyamide POY CNY25086/ton, up 56.50%.

 

It is important to note that, although substantial progress has been achieved in all areas of statistics in the beginning of 2010, the chemical fibre industry this year later faces uncertain future.

 

For profit, the growth rate of profit margins of chemical fibre industry was 86.5, 8.9, 3.1 and 2.0 respectively in Feb., Mar., Apr. and May. The growth rate has experienced a decline. Although we attributed the decline to the positive growth recorded in the same period of last year, but, other statistics index also shows that the chemical fibre industry will face uncertain future.

 

For industrial added-value, the growth rate of industrial added-value of chemical fibre industry amounted to 12.3%, 16.4%, 13.0% and 15.8% respectively in Feb., Mar., Apr. and May.

 

For market price, the growth rate of chemical fiber fabric prices of statistics-worthy enterprises was 12.15% in the Jan.-May 2010 period, 8.59% percentage points lower than the Jan.-Feb. 2010 period. Fresh data shows that the price of Polyester Staple Fiber amounted to CNY9598/ton in Jun., 4.89 percentage points lower than last month; the price of Rayon Staple Fiber amounted to CNY18502/ton in Jun., 4.17 percentage points lower than last month.

 

For macro economic data, the Purchasing Managers' Index (PMI) for China's manufacturing sector stood at 52.1 percent in June, down 1.8 percentage points from last month, the China Federation of Logistics and Purchasing (CFLP) said. The PMI includes a package of indices to measure manufacturing sector performance. A reading above 50 percent indicates economic expansion, and below 50 percent indicates contraction. The PMI index slowed for the second consecutive month, indicating a moderation in the pace of China's manufacturing expansion because of the country's macro regulation policies and slowdown in global economic recovery.

 

Besides, People's Bank of China over the weekend said it was abandoning its peg to the US dollar, a move taken to shelter the China economy during the recent global crisis, and was reinstituting a managed float it first detailed in July 2005. The appreciating yuan in China could spell serious trouble for the Chinese textile industry as it will further slash the marginal profitability of China's textile makers. And, European debt crisis and the consequent sovereign credit risk of developed economies also have impact on China's chemical fibre industry