VAT is to cut down from 16% to 13% since Apr 1 2019. Its direct impact on polyester profit results from the reduced rate and players’ buy and sell spread.
Distribution of the profit squeezed from VAT cut depends on each sector’s bargaining power. For example, if polyester plants hold stronger bargaining power against downstream, they may keep selling price stable or raise offer before the VAT is cut, which can be seen from recent price fluctuation in polyester products. PFY and PET bottle chip producers maintained the price firm as usual. Meanwhile, if polyester plants have stronger bargaining power than upstream, polyester plants are likely to push feedstock to decline. If bargaining power is so-so, polyester plants may arrange feedstock purchase as early as possible, and draw up invoice for deduction. Downstream producers will also demand pre-tax settlement, to cater to future development. But this will involve producers’ feedstock purchase invoice, if downstream and upstream can reach consensus, then uniform tax rate is negotiable, and vice versa.
Assume PET bottle chip selling price at 8400yuan/mt after tax, and with no fluctuation within short, based on 16% VAT, the tax=after tax sales revenue/(1+16%)*16%=8400/1.16%16%=1158.6yuan/mt, while after Apr 1, the tax=8400/1.13*13%=966.4yuan/mt. The spread is 192.2yuan/mt, but this is not the ultimate VAT PET bottle chip plant needs to pay, the figure needs to deduct VAT generated during feedstock and auxiliary materials purchase. In this way, actual impact on market price and enterprises’ profit is limited, while cash flow may be the one to bear the brunt of VAT cut.
Hence, for highly competitive industries, VAT cut may bring limited positive impact, or in other words, impact on the industry depends on which sector holds more power. One thing for sure is that delivery of polyester plants is quite likely to expand in drastic.#??#
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The Center for Advanced Studies on Applied Economics (CEPEA)/ESALQ cotton Index, with payment in 8 days, dropped 0.35 per cent between January 31 and February 28 to close at 2.9318 BRL per pound at the end of the month. The average price in February was 2.9341 BRL per pound, 0.96 per cent lower compared to the previous month, in real terms.
Prices oscillated and liquidity decreased in the market during the month due to the fierce competition between the Brazilian agents, CEPEA said in its latest fortnightly report on the domestic cotton market.
“Part of the active purchasers was searching for high quality batches, but bidding prices were lower than asking prices. Other purchasers, however, accepted lower quality cotton. Some processors, in turn, stayed out of the market during the entire month,” the CEPEA report said.
According to data from the BBM (Brazilian Commodity Exchange) tabulated by CEPEA, 67.5 per cent of the 2017-18 Brazilian crop, estimated at 2.005 million tons, may have been traded until February 28. Of that total, 57.7 per cent was bought for use in the domestic market, 30.9 per cent for export to the international market, and 11.3 per cent to flex contracts (exports with an option to sell in the Brazilian market).
For the coming season, at least 22.3 per cent of the 2018-19 production (forecast at 2.564 million tons by Conab – National Company for Food Supply) may have been traded in the same period, with 47.5 per cent allocated to the domestic market, 26.4 per cent to exports, and 26.1 per cent to flex contracts.
Eltex will present Eltex EYE yarn fault detection system for tufting machines at ITMA 2019 expo, in hall 4, stand B104. The world’s leading international textile and garment technology exhibition will be held from June 20-26, 2019, in Barcelona, Spain. Eltex is the leading provider of yarn break sensors and yarn tension monitors headquartered in Sweden.
Beta testing of the latest advanced version of the Eltex EYE yarn fault detection system for tufting machines is currently underway at the plant of a major high end carpet manufacturer in the USA.
“The latest advanced tufting machines put significant limitations on the space that is available for yarn fault detection systems, and the Eltex EYE is very comprehensive, with each yarn individually controlled for a 100 per cent detection of every tufting yarn break and end out. Unlike scanning inspection systems, we are monitoring each individual yarn position in real time. As a consequence, we have concentrated on the further miniaturisation of our sensors. Our sensors are usually fitted between the feed rollers and the needles and based on the well proven piezoelectric principle. Their special compact design already enables them to be fitted on machines with gauges as dense as a tenth of an inch,” Brian Hicks, managing director of Eltex of Sweden, the developer of the technology said in a company press release.
All of the data from the sensors is processed by a master control unit which provides stop and warning light indications to the extremely user-friendly operator terminal in response to any detected yarn fault. Eltex reports major gains with its first generation Eltex EYE in the carpet and artificial grass manufacturing sectors in recent years.#??#
The US remains the world’s epicentre for carpet tufting and Eltex customers are served there from the company’s wholly-owned subsidiary in South Carolina. Western Europe, however, still has a strong manufacturing base, particularly in Belgium, Denmark, Germany, the Netherlands, and the UK, while Turkey dominates in woven carpets.
With its research and development work primarily carried out at its headquarters in Osby, Sweden, the company’s manufacturing plant has been located at Templemore in Ireland since 1976, providing significant advantages in terms of high flexibility and logistical services to customers on both sides of the Atlantic.
Eltex is a member of TMAS, the textile machinery association of Sweden, which will have a significant presence at ITMA 2019 in Barcelona.#??#