FOCUS: China labour shortage hits textile chems

19 March 2007 05:18  [Source: ICIS news]

By Salmon Lee

SINGAPORE (ICIS news)--An acute labour shortage in China’s textile industry has affected demand in the polyester and feedstock markets despite earlier market forecast that production will resume after the February holidays.

But the situation could improve in April when orders pour in during the traditional peak season, buyers and sellers said on Monday.

"Many of our customers in the [downstream apparels] sector tell us that they cannot resume full operations at their factories, because workers who had gone home for the Lunar New Year did not return," an official from textile major Rong Hao Dyes and Textile said in Mandarin.

Labour shortage is a common problem among the 23 spinners, weavers and garment factories in Zhejiang province, a major textile production centre, according to a poll by ICIS.

The booming economy has made it easier for the mobile workers to find employment, an official from Ming Yang Chemical Fibre said.

"There are just so many opportunities throughout China where they can easily find work or because they’ve earned so much, they just want a longer holiday," he added in Mandarin.

The poor demand from downstream sector has hit prices of textile-related chemicals purified terephthalic acid (PTA), monoethylene glycol (MEG) and filament yarn, the sources said.

Prices of filament yarns had fallen on average yuan (CNY) 300-400/tonne ($38.8-51.7/tonne) since early March on rising inventories with some producers reporting up to 25 days’ worth of stocks, they added.

PTA and MEG prices fell $5-15/tonne on Friday to $845/tonne and $865-870/tonne from a week ago, according to global chemical market intelligence service ICIS pricing.

An official from yarn producer Xiang Sheng Group said polyester prices could fall further as stocks were too high.

"There’s an obvious disconnect between the upstream and downstream sectors. But you notice that polyester producers are still not cutting back on operations, so in theory, demand for feedstocks remains strong and supply is actually tight," said an official from MEGlobal, one of the largest global MEG suppliers.

A Macau-based Winsway trader said polyester producers will be comfortable with the margins even if they drop prices so they were unlikely to cut production yet.

Another polyester producer was confident that orders will soon return.

"The post-New Year boom might not have come, but it may come in April, as orders for made-in-China garments pour in during the peak manufacturing season in spring and workers in the textile factories see the benefits of returning," Dai Hao, an official from Zuo Cheng Polyester, said in Mandarin.

Many polyester producers were looking forward to the Guangzhou Trade Fair which starts on 15 April. The fair is the largest showcase of China’s exports and is often seen as a barometer for the health of its export-oriented economy.

"We believe that things might just get better, and the workers should very soon get sick of their protracted holidays," the Rong Hao official said.

By: Salmon Aidan Lee
+65 6780 4359

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