-- Chairman Zheng Baoyou talked about regional competitive strategy and industrial chain supporting advantages

Source: China Textile News Date: July 6, 2016

Zheng Baoyou, chairman of Fujian Jinlun High Fiber Co., LTD. (hereinafter referred to as Jinlun High Fiber), who has been over 70 years old this year and "plunged into" the textile industry for more than 30 years, is a pivotal figure in the Fujian textile industry.

The "Zheng family" three generations represented by Zheng Baoyou founded and operated a number of textile mills, with a total spinning scale of about 4 million spindles, accounting for 66.67% of the total spinning scale of 6 million spindles in Changle City. In Fujian Changle textile industry, the strong competitive advantage of "Zheng's" enterprise is well known.

Such a result is enough to make many people envy, but Zheng Baoyou is not satisfied. In 2003, he marched to the upstream of spinning chemical fiber raw materials and founded Jinlon high fiber. The enterprise has an annual output of about 1 million tons of polyester yarn, which has become the largest polyester yarn production base in Fujian Province, the largest and the fourth largest polyester staple fiber production base in Fujian Province, and the first textile chemical fiber enterprise with an output value of more than 10 billion yuan in Fuzhou region.

In recent years, the national economy has generally encountered downward pressure, and the Fujian provincial government convened representatives of relevant enterprises to hold a discussion and analysis meeting. If there are five or six business representatives from different industries, Mr Cheng Baoyou will be one of them and he will be invited to attend as a representative of the textile industry. Zheng Baoyou insisted on conveying the idea to the Fujian provincial government: although textile is a traditional industry, it is still full of development potential through continuous innovation.

So, the spinning scale of "Zheng's" can rapidly expand from the initial thousands of spindles to more than 4 million spindles, and it is still not worried about sales in the four years of poor market conditions. What is the "secret" of operation? From the spinning plant to the annual production of 1 million tons of chemical fiber raw materials, is out of what considerations? Both chemical fiber raw materials and spinning plants, what are the competitive advantages of such an industrial chain? Compared with the polyester enterprises in Jiangsu and Zhejiang areas, what are the characteristics of Jinren high fiber in Fujian Changle that insist on "deep cultivation"? In recent years, the market downturn, Jinlon high fiber has made what adjustments, what are the new ideas?

Filament "private sale"

Before 2003, when Jinlun high fiber was not established, the polyester staple fiber raw materials needed by Changle spinning enterprises were mostly purchased from Jiangsu and Zhejiang areas, and even from abroad. In order to solve the bottleneck problem of raw materials faced by everyone, Zheng Baoyou saw the opportunity to invest in the establishment of Jinlon high fiber.

Jinlun high fiber phase I 200000 tons polyester staple fiber project was put into operation in 2005, and Phase II 200000 tons polyester filament production line was put into operation in 2008. By the end of 2012, the fourth phase of the project was also fully put into operation. At present, the annual output of Jinlon high-fiber polyester filament is about 500,000 tons, and the annual output of polyester staple fiber is about 500,000 tons.

"After the polyester staple fiber project, taking into account the local textile industry developed, warp knitting factories, downstream demand, we have invested in the construction of filament projects, including POY, DTY, FDY varieties, these products enjoy a high reputation in Changle." Changle in the past did not have chemical fiber raw materials, textile factories to buy products in Jiangsu and Zhejiang, freight to bear. After the establishment of Jinlun high fiber, the raw materials of Changle textile enterprises realized the nearby supply, saving their procurement costs. It can be said that Jinlon high fiber has been responsible for the supply of raw materials for Changle textile since it was put into production. Changle textile industry is so developed, and the development of Jinlon high fiber has a lot to do with." Zheng Baoyou analyzes the value of investing in upstream raw materials.

Zheng Baoyou still remembers the boom in business in previous years. "Before 2010, customers even had to rely on relationships, relatives and friends to buy our polyester filament, but we had no choice," he recalls. At present, Jinlun high-fiber polyester filament is mainly sold to the weaving enterprises around Changle. Zheng Baoyou has an image saying: "The local warp knitting, lace and knitting enterprises in Changle are like our 'private' customers. Compared with polyester filament silk factories in Jiangsu and Zhejiang, we have more advantages in meeting the needs of local weaving customers. We basically sell our polyester filament to our 'neighbors' and digest it on the spot."

One of the most immediate benefits of regional sales is to save shipping costs. In the current fierce competition, freight for polyester enterprises to occupy the market, how much profit is crucial. In Changle, the downstream weaving industry developed in the regional market, Jinlon high fiber accounted for the "home" advantage. For example, from Jiangsu Shengze to Changle, the freight per ton of polyester yarn is about 300 yuan, and if you purchase from Jinlun high fiber nearby, the freight can be saved.

Staple fiber "self-marketing"

From a national perspective, the advantages of Jinlon high-fiber polyester staple fiber are very prominent, mainly because "Zheng's" itself has a large spinning scale, and it can all digest its products internally.

In Changle, Zheng's total spinning scale is about 4 million spindles. The annual production of 500,000 tons of polyester staple fiber is not enough to supply its own spinning mill.

"Regardless of whether the market is good or bad, we are full production, but other polyester staple fiber factories are not so lucky." Once the market is not good, they have to cut production, and the production capacity can often only open to 60%. For factories, if capacity cannot be fully released, production costs will rise and competitiveness will be affected. From this point of view, Jinlon high fiber in the national polyester industry competitiveness is unique." Talking about this, Zheng Baoyou's tone is brisk.

In Zheng Baoyou's view, the competitive advantage is also unique, and their own cotton mill. "Zheng's" a number of enterprises yarn production is large, including cotton yarn, combed cotton yarn, T-shirt yarn, rayon yarn, colored yarn, hemp gray yarn and other complete varieties, which will be driven by customer procurement. Moreover, due to the large quantity and the number of enterprises, it is easier to meet the special needs of customers.

For example, some Changle spinning enterprises have a daily yarn production of only 3-4 tons, if the customer needs 60 tons of yarn, they are difficult to adjust production, more difficult to meet customer needs. The daily yarn production of "Zheng's" textile factory is about 1,000 tons to 2,000 tons, and they can provide the products that customers need with a little adjustment. Moreover, a number of different cotton mills are complementary, even if the factory is out of stock, it can also coordinate customers to buy goods from the nearest factory with stock.

"The spinning mill with a limited number of spindles cannot do everything, and we basically have all kinds of yarn, so despite such a large amount, even after 2012, when the market is more difficult, we have never reduced production." Before 2010, our yarn was in short supply." Zheng Baoyou said.

When asked about the "secret" of the rapid expansion of the scale of spinning, Zheng Baoyou said: "We have built a lot of factories, but there is a feature that the factories are not together, and each enterprise has a separate 'combat' ability." The scale of a spinning mill is about 300,000-500,000 ingots, which can be managed by a person. Such ideas and models have certain advantages, making it easier for factories to 'copy'. Moreover, different new factories also give the business backbone more room for career advancement, which is conducive to the training of talents. In addition, we insist on starting from sales to determine the size of the investment scale, if the amount of a sudden to do a large, but no one to buy goods, it is easy to have problems; But if the gradual development according to demand, so that the product is in short supply, then the situation will force enterprises to go big, scale will be easy to do."

Silk "spot"

The current capacity of the polyester industry has been in a state of structural excess, in this context, Jinlon high fiber will no longer consider expanding capacity, but committed to technology and product innovation.

In order to strengthen product innovation, Jinlon high fiber has set up a new product research and development team this year, led by Zheng Baoyou. Zheng Baoyou said: "The current polyester industry is already oversupply, we do not need to expand in volume. But we will continue to invest, improve the added value of products, adjust the product mix, make the variety more diversified, and pursue higher profits."

Among them, increasing the research and development of color silk, and developing innovative color yarn and knitted fabrics based on color silk is an important breakthrough idea. In 2015, Kinlon began to explore how a single production line could produce two colors of polyester. In May and June this year, the color silk products are on the market.

Zheng Baoyou pointed out that the production of color silk is very profitable. A polyester staple fiber production line of Jinlon high fiber can produce 200 tons of products per day, if this production line produces all color silk every day, the output of 10 days is 2000 tons. But in fact, the current amount of color silk is very small, 2000 tons of color silk to sell to who? It's a big problem. At the same time, although the profit of the color silk is high, if the color silk production line is turned back to produce ordinary products, the machine needs to be cleaned, and the raw materials and output are wasted, so that the profits of the production of color silk will be returned. In view of this, Jinlon high fiber began to research, explore, and seek technical breakthroughs.

"Factories deal with machines every day, and when companies have new needs, technicians will think about how to produce a small amount of black silk and white silk on a line, and finally it has become a reality." At present, there are seven lines in the factory, and if each line can successfully produce white and other colors, the color of polyester products will be many. We will continue to do similar innovations in the future." Zheng Baoyou said.

However, at present, Jinlon high fiber is only from the "point" production of color silk products, will not be fully rolled out. In this regard, Jeong Bowoo stressed that companies cannot make many innovative products at once, but must ensure sales first. The scale of an enterprise, the output of products to do how big, who said it should not be counted, should be determined by market demand."

Export "flowering"

In the domestic polyester market ahead of the difficult three years, Jinlon high fiber gradually opened the export market, the rapid growth of export volume to a large extent to ease its pressure in the domestic market, and become a new growth point for corporate profits.

Since 2014, some polyester products of Jinlon high fiber have been exported to Pakistan, Turkey and other countries. In 2015, export volume achieved breakthrough growth, rising to about 10% of total sales, and sales volume doubled. In the first five months of this year, the monthly export volume has achieved a substantial increase of 100% to 200% year-on-year, and the proportion of total sales has continued to rise to about 20%.

Tasted the "sweetness" of exports, Jinlun high fiber has continued to increase investment in the past two years, specifically for DTY product exports. At present, DTY exports account for about 80% of its total annual exports. In 2015, the company invested more than 100 million yuan in bomb equipment, and in recent years, it has invested 300 million yuan to 400 million yuan, and this year, it is still investing in equipment one after another.

In recent years, the domestic polyester market is in a new round of downturn cycle, in this market, is it worthwhile to invest hundreds of millions of yuan? In this regard, Zheng Baoyou has his own philosophy: "We increase investment to improve product profits." For example, the profit of 1 ton of POY products was only 50 to 100 yuan, but through the introduction of advanced ammunition equipment, the profit of each ton of products can be increased to about 1,000 yuan. If calculated from the perspective of input and output, the cost of input equipment is expected to be recovered in about 3 years. The total volume of one million tons is relatively large, but the company s competitiveness will be enhanced by diversifying its product mix through innovation.

"In the next few years, the development idea of Jinlun high fiber is to continue to occupy the Changle market, this' position 'can not be lost, on this basis, efforts to develop the export market, it is expected that the company's export volume will continue to grow." Zheng Baoyou is more optimistic about the prospects of the export market.

When asked when the polyester industry market that is still carrying the load will "peak", Zheng Baoyou made such a judgment: "In the next three years, the polyester market will still be oversupplied, and the relationship between supply and demand is difficult to improve." However, the big players can still survive, but their profits will suffer. In the next few years, the chance of investing billions of yuan in large-scale factory construction and large-scale expansion of production capacity becomes very small, but there will still be some additions to local production capacity." Still, Mr. Zheng is optimistic about the recovery in demand for polyester products. "In the next few years, the demand for warp knitting and other weaving links will grow faster than the growth of the polyester industry's own capacity, which will bring hope." Changle textile and chemical fiber industry's current difficulties are only temporary, there are still many opportunities, we should be firm confidence to move forward." Jung Po-woo stressed.