For China's textile and garment imports and exports, the industry generally believes that the impact of the Red Sea crisis on China's cotton and cotton textile industry is "short and long", limited optimism, for the following reasons:

01 Some orders from Bangladesh and other countries return to China

The Red Sea crisis not only led to Southeast Asia, South Asia countries textile, clothing and other exports to Europe have been greatly affected, but also some countries to purchase Brazil, the United States cotton, African cotton and other port volume decline, the direct result is that Europe, the United States and other countries clothing enterprises, retailers directly order to Chinese processing enterprises. Some export orders from Bangladesh, Indonesia and other countries have to be returned to China due to raw material problems and transportation problems. For export enterprises in Southeast Asia and South Asia, if they detour through the Cape of Good Hope, not only freight costs will rise sharply, profits will decline significantly, and there is great uncertainty in the delivery time.

02 The proportion of European market in China's exports continues to decline

Although the Red Sea crisis has also had a certain impact on China's textile clothing exports to Europe (Europe and the Middle East routes have appeared empty flight phenomenon), on the one hand, the Central Europe freight train can be substituted for sea transport, the space of the Central Europe freight train has been booked in advance, and the freight rate in January has risen by 10-20%; On the other hand, the European market accounted for the proportion of China's textile and garment exports continued to decline (14.4% in 2022, and China's cotton knitting and woven clothing to the EU fell 30.9% and 20.7% respectively from January to October 2023).

Overall, due to China's round production of more than 880,000 tons of reserve cotton in 2023 (imported cotton accounts for a relatively large proportion), port cotton inventory is sufficient (American cotton, Brazilian cotton transport by the Red Sea crisis is not prominent), so domestic cotton, imported cotton supply is sufficient, and export orders (including traceable orders) are sufficient.

03 In the medium and long term, it is not conducive to China's cotton consumption, cotton textiles and clothing exports

The Red Sea crisis has led to a shortage of containers and port congestion, the shortage of empty boxes may spread to Asian ports as soon as mid-to-late January, and the empty boxes required for China's export season may be trapped in other places, making the textile and clothing export, cotton import containers in short supply, and ships in the Asian region will also face the challenge of no boxes available.

Affected by the tension in the Red Sea region, market freight rates such as North American routes and Persian Gulf routes will continue to rise comprehensively, and the cost of China's textile and clothing exports and cotton imports will rise. The China-Europe freight train only temporarily plays a substitute role for the Red Sea route, and the carrying capacity is still not comparable to sea transport.

At present, the cabin in January and February has been booked in advance by European customers, but at the same time, it restricts the export demand of textiles and clothing to other countries and regions, and the difficulty of contract performance has increased.