With freight and fuel prices soaring, cotton futures prices around the world have nearly doubled in just one year. This scene has directly dealt a heavy blow to Asian garment manufacturers downstream in the industrial chain, and their global retail sales have Customers are unwilling to shoulder additional costs, leaving many garment factories to bear the pain of soaring production costs on their own.
Asia’s apparel manufacturers, one of the region’s largest labor absorbers, are facing an existential crisis ” ” span>It has gradually evolved into a wave of unemployment – some smaller garment factories have suspended operations, causing thousands of employees to lose their jobs, while causing a setback in the region’s recovery from the epidemic. , and also poses new challenges to policymakers already battling high inflation.
To stay afloat, some yarn and clothing manufacturers have even begun replacing cotton with cheaper synthetic fibers.
” Our factories are running at full capacity. But at what cost? We are barely generating any profit, ” Headquartered in Bangladesh Sterling Group Managing Director Siddiqur Rahman said in the national capital Dhaka. The group supplies well-known global clothing brands such as Gap .
Existence crisis breaks out in full force
After the outbreak of the Russia-Ukraine conflict, uncertainty about the outlook for European demand has exacerbated the difficulties of Asian apparel manufacturers. China and Bangladesh are the top three apparel exporters in the world. Rahman said that more than 60% of the clothing previously produced in Bangladesh was exported to Europe.
In India, the world’s leading cotton producer, several small apparel manufacturers are struggling to fill orders from three months ago, when cotton prices were about a third below current levels. Chairman of the Indian Textile Association Ashok Juneja said, ” Many small businesses have begun to stop receiving new orders.“
Cotton prices in India have more than doubled in just one year after rains affected the harvest. During this period, global cotton prices also surged by 70%, reaching a record high in 5 2011 The highest level since 2011. Analysts predict that global cotton prices are likely to see larger gains as output in the United States, the world’s largest cotton exporter, is damaged by drought and demand in China recovers as the epidemic situation improves.
Indian Exporters Adwaith Textiles Managing DirectorRavi Sam said that given the unwillingness of buyers to raise price, which is a double whammy for apparel manufacturers. They are also unsure about the demand prospects for the summer, especially in Europe, ” he added.
The South India Textile Enterprises Association said that in southern India, which accounts for the majority of the country’s textile exports, many spinning mills have decided to stop producing yarn in May and purchasing raw cotton.
The shutdown is obviously a painful decision for those working in the industry, as many had already faced long periods of unemployment during the coronavirus lockdown. ” Nearly 40% of ’s factories have closed because they are financially unviable, ” Indian garment practitioner Duraisami said he recently lost his job at a textile factory in the southern state of Tamil Nadu.
Across the region, Duraisami is faced with similar jobless hordes. The local government of Mir Nadu said thousands of workers in the region lost their jobs in May.
Switch to polyester synthetic fibers
Asian apparel makers, which also count Walmart and Nike among their customers, rely heavily on garment exports to Europe and the United States.
Although demand for clothing rose in the first quarter as the world gradually emerged from the COVID-19 epidemic, the recent severe epidemic in Asia hasRising fuel prices caused by fuel consumption and the conflict between Russia and Ukraine still suppressed related demand.
Rahman stated that ” Transportation costs have quadrupled compared to pre-epidemic levels, and international brands are obviously unwilling to absorb the additional costs. costs, which forces Asian manufacturers to bear the cost pressure independently.“
To cut costs, some textile mills are using more polyester synthetic fibers, which cost about 0.60 per pound to 1 USD, while raw cotton costs 1.4 USD per pound.
Rogers Varner , headquartered in Cleveland, Mississippi, said, ” From what we are hearing from mills in Asia, they are adjusting their spinning ratios to use more polyester.
However, this approach obviously has certain limitations, because many contracts have strict requirements on the proportion of cotton. ” There will be some substitution space…but you can’t replace all cotton just because you don’t want to pay a high price, “VLM Commodities Ltd. Partner and AnalystLouis Barbera said.
Will cotton prices continue to rise?
Many industry insiders now also say that the high costs faced by Asian garment factories are unlikely to ease in the short term as cotton prices are expected to continue to rise.
A trader at a global trading company in Singapore said that although the epidemic blockade measures have affected China’s demand in the past period, cotton prices are still rising, and as China gradually recovers from the epidemic and resumes buying, cotton prices are expected to rise further. China’s cotton consumption accounts for about one-third of global cotton consumption.
The hot weather experienced in Texas, the main cotton growing area in the United States, may also contribute to the subsequent rise in cotton prices. Texas’ cotton production accounts for more than 40% of the total U.S. production. Barbera said, ” If rainfall continues to fail in west Texas, cotton prices are expected to further exceed the current level. Level.“
“This could ultimately push up clothing prices and add to inflationary pressures. I think rising cotton prices are spreading to retail stores. At some point, the question may become whether people still I can afford it, ” Commodities CompanyKeith Brown and Co Responsible personKeith Brown said.
Garment Industrial Park near Dhaka, the capital of Bangladesh (data map)
Cotton futures prices nearly doubled to their highest level in 11 years as energy and freight prices rose, and rising apparel costs hit South Asian apparel manufacturing Some small garment factories in India and Bangladesh have stopped production and thousands of employees have lost their jobs.
Affected by extreme weather such as high temperatures and heavy rains, major cotton-producing countries such as India and the United States have greatly reduced cotton production, and global cotton futures prices have soared by 70% during the year, yes span>2011The largest increase since 2011. A recently unemployed spinning mill employee in the southern Indian state of Tamil Nadu said that nearly 40% of local spinning mills have stopped working due to poor funding. Some clothing manufacturers have to use cheap synthetic fibers to replace cotton in order to maintain production.
While the price of cotton raw materials is rising, global transportation costs remain high and consumer demand in markets such as Europe is weak. Rahman, general manager of a Bangladeshi clothing manufacturer, said that transportation costs have increased four times compared with before the new crown epidemic. 60% of the clothing produced in Bangladesh is exported to Europe. Affected by the international situation, the prospects of the European market are bleak, and clothing retailers refuse to increase clothing prices. Rahman admitted that while the factory was still operating at full capacity, it was barely profitable.
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