In just the past few days, 400,000 meters of grey cloth have been sold, primarily including four-way stretch and T400 broken twill fabrics. After the Chinese New Year, sales of grey cloth have increased by as much as 300% compared to before the holiday!" said a manager from a weaving factory specializing in producing stretch grey cloth.
While a 300% increase in sales for grey fabrics is indeed an unusual phenomenon, it's common that overall market sales see some growth after the Chinese New Year compared to before. Not only has the volume of sales increased, but some companies have also raised their prices on raw fabric materials. It's understood that the price hike for certain specifications of grey cloth ranges from 0.05 to 0.2 yuan per meter. According to textile merchants' feedback, before the Chinese New Year, grey cloth prices were at a low level, but sales figures were not favorable. However, after the holiday, with grey cloth prices rising, sales surprisingly picked up. The textile merchants are filled with mixed emotions, expressing great joy amidst these developments.
In reality, whether it's synthetic fiber raw materials or raw fabrics, the market seemingly tends to buy when prices rise rather than fall. While this phenomenon of buying at high prices is not commonplace, especially in the raw fabric material sector, each situation requires specific analysis. Let's analyze the recent price hike in raw fabric purchases.
Rising Production Costs Force Buyers to Accept
The main reason behind the raw fabric price increase is the rise in chemical fiber raw material costs. Although the increase isn't significant, it does lead to higher costs for weaving factories. Alongside the increase in raw material costs, labor costs have also risen post-Chinese New Year. As per textile merchants, even without salary hikes, bonuses and other benefits have increased, thus contributing to an overall rise in labor costs. This aggregate increase in various costs correspondingly raises the production cost of raw fabrics, leading to a hike in their selling prices. With these cost increases beyond the control of fabric owners, buyers are left with no choice but to accept the reality of price rises.
Rebounding Demand and Essential Purchases
Certainly, there are instances where production costs for raw materials continuously rise, yet companies still lower their prices to promote sales. This time, companies have managed to significantly raise raw fabric prices mainly due to robust support from rebounding demand. After every Chinese New Year, various businesses kick off new production cycles and experience a wave of order placements; this year, the first wave of demand saw a notable surge. This rebound in demand provides enterprises with leverage, particularly those factories which had cleared their inventories long ago, allowing them to better control the pricing trend of raw fabrics.
Consumer Expectations and Speculative Behavior
In the grey cloth market, some buyers may view grey cloth as an investment or speculative tool. When prices go up, they might perceive it as an investment opportunity and thus are willing to purchase. Conversely, when prices drop, they might opt to sell to avoid further losses—this is the principle of 'buy high, don't buy low.' Speculation requires opportunities, and current market participants hold optimistic expectations about future markets. They believe that demand will continue to grow, hence prices may rise. Thus, during the initial stages of a price hike, there often emerges a rush of buyers purchasing and stockpiling goods, which explains why raw fabric prices rise, yet sales actually improve.
In summary, the primary reasons for the increase in raw material costs include supply-demand dynamics, consumer psychological expectations, and speculative behavior, all contributing to price hikes instead of drops. However, in actual transactions, buyers must also consider other factors such as product quality, product specifications, and risks associated with price fluctuations to make wise decisions
Tyler
Tyler