"A study by the US Fashion Industry Association indicates almost 67 per cent respondent’s expected value or volume of goods sourced from China to decrease over the next two years. A striking example of this is Steven Madden, which expects to source 15 per cent of its handbags from Cambodia this year, with this percentage doubling in 2019. Similarly, Tapestry, the luxury company behind Coach and Kate Spade handbags, is boosting Vietnamese production and sourcing only 5 per cent from China. Vera Bradley, meanwhile, is planning to shift its manufacturing operations to Cambodia and Vietnam from China."

Increasing tariffs on Chinese products has led to the rise of countries like Cambodia and Vietnam as attractive investment destinations from consumer-goods like Steven Madden and Tapestry Inc.’s Coach. And while the Trump administration has slapped duties on goods from many of its largest trading partners this year, it has allowed some Cambodian products to continue duty-free access to the US market.

A study by the US Fashion Industry Association indicates almost 67 per cent respondent’s expected value or volume of goods sourced from China to decrease over the next two years. A striking example of this is Steven Madden, which expects to source 15 per cent of its handbags from Cambodia this year, with this percentage doubling in 2019. Similarly, Tapestry, the luxury company behind Coach and Kate Spade handbags, is boosting Vietnamese production and sourcing only 5 per cent from China. Vera Bradley, meanwhile, is planning to shift its manufacturing operations to Cambodia and Vietnam from China.

Cambodia gains with changing dynamics

This move to shift production has impacted China severely. Stocks of Hong Kong-based Stella International Holdings, developer and manufacturer of footwear brands like Prada SpA and Guess has dropped to its lowest point since 2009.

On the other hand, according to an annual report by the National Bank of Cambodia, the country’s footwear exports rose 25 per cent in 2017, while its garment exports increased 8 per cent in the same period. Vietnam, meanwhile, has enjoyed a foreign investor-led economic boom for years, attracting billions of dollar investments from the likes of Samsung Electronics and Intel Corp. It is transforming from mainly an exporter of agricultural commodities, such as rice and coffee, to a Southeast Asian manufacturing hub.

Even before China and the US escalated their trade tensions, Cambodia enjoyed duty-free privileges for products such as handbags, suitcases and wallets, part of a US program to help boost development in low-income countries. This designation has so far been maintained by the Trump administration. Cambodia also is one of the lowest-cost countries when it comes to labor. Oxford Economics estimates labor cost in Cambodia to be a quarter of China’s.

The down side

However, the country’s productivity rates are low compared to China, making it a challenge to manufacture more elaborate products. A survey by the Hong Kong Development Council, which promotes trade and investment for the territory, suggests average labor productivity of Cambodian workers was about 50 to 60 per cent that of Chinese workers. Cambodia’s infrastructure also lags behind China’s. The nation’s infrastructure was ranked 106 out of 137, behind Vietnam and Laos, in the World Economic Forum’s Global Competitiveness Report. This can cause difficulties in getting merchandise out of the country.

As per the US government, the recent Cambodian elections held in July, where the ruling party won all 125 seats in the National Assembly, were ‘flawed’. As a result, the US and Europe are likely review their trade policies and potentially stop giving tariff preference to Cambodia’s garment industry. This can prove to be a fatal blow for the nation, where garments make up 64 percent of total exports.

Uzbekistan has initiated several measures to focus on the textile industry. The country is trying to grab foreign investments to implement various projects worth over $70 million. As an additional incentive for Chinese investors to kick-off their operations in Uzbekistan, a delegation of 33 representatives of China’s associations and textile companies was hosted recently by the Uztekstilprom Association in Tashkent. The Chinese delegation was headed by the Chinese National Council for Textiles and Clothing.

The event aimed to boost cooperation between Uzbek and Chinese companies involved in the textile and apparel-knitting as well as the production and supply of finished textile products to the Chinese market. The forum was attended by the the leaders of the State Committee of Uzbekistan for Investments, UzTrade JSC of the Foreign Trade Ministry, the Economy Ministry. Representatives of the textile industry of the two countries were also present in the meeting. Bukhara, Kashkadarya, Samarkand and Syrdarya regions were represented as major locations where investment can be made.

The combination of reshoring and related foreign direct investments in the US jumped 52 per cent in 2017. Apparel saw one of the largest increases, while transportation remained the strongest overall. Of the total manufacturing jobs that were added, 90 per cent were reshoring and FDI related.

The US apparel consumer flexes their muscle on deciding how, why, and where they will purchase their sewn goods products. The effect of this ability extends into the very fiber of the industry, reflecting in more orders in smaller quantities with shorter lead times, while slowing the sales cycle, putting pressure on existing e-commerce infrastructure, forcing the adoption of fast fashion, and digitalisation of the value chain and as costs increase, the consumer pushes for the same if not a lower price.

While US imports of textiles and clothing increased in value by 1.3 per cent in 2017, this increase came after a 6.5 per cent decline in the previous year and, as a result, imports remained below the levels seen in 2014 and 2015. Total apparel imports were at their lowest levels in several years. With consumer spending on the rise, there is no time like the present for locally manufactured apparel, furniture, and transportation interiors.

For the first half of 2018, spandex supply in China significantly outstripped demand. Spandex was purchased on demand, and inventory of several weavers and dealers slightly went up. Spandex prices continuously dropped, but prices of MMDI, one of the main feedstocks for spandex, increased by around 20 per cent year on year. PTMEG prices slightly declined year on year, while overall feedstock cost was higher than the same period of last year. Cash flow of spandex 40D deteriorated slightly year on year, while several brands with low financial costs, efficient units and differentiated products showed meager profits. The concentration ratio of the spandex industry is expected to gradually rise in the next few years.

Compared with the great volatility in the past two years, the inventory fluctuation of spandex industry was slight in 2018. Spandex plants focused on selling, while the operating rate of downstream weaving plants was higher than in the previous two years. Downstream buyers purchased spandex mainly to cover the pressing demand this year, and spandex inventory slowly increased. The monthly sales ratio was largely balanced.

The operating rate of the spandex industry was mainly above 90 per cent entering the third quarter. The operating rate of spandex downstream weaving plants was 30 per cent to 70 per cent.

A few manufacturers are planning to opt for man-made fibres like acrylic and polyester blend to counter increasing rising wool price. Price of raw Merino wool imported from Australia rose between 30 and 200 per cent depending on microns in the past 7-8 months. Raw wool, which was available at Rs 1,200 per kg around 7-8 months ago now costs Rs 1,600 per kg.

Price volatility of raw material is likely to impact manufacturers, resulting in increase of prices of shawls, pullovers, coats and other woollen garments. Exporters will, however, face the heat due to their export commitments at negotiated rate. Exporters fix rates with buyers much in advance. Punjab is the main cluster of India’s woollen units, followed by Haryana and Rajasthan. The increase in prices of raw material will adversely affect the Rs 3,000-crore Punjab shawl industry, mainly concentrated in Ludhiana and Amritsar. The other shawl industry centres are Jammu & Kashmir, Kullu in Himachal Pradesh and in the North-East.

Santoni and Lenzing will pioneer a concept called den/IM Tech.

This consists of innovative den/IM knits with indigo yarns that have now moved beyond apparel to shoes and accessories.

This den/IM Tech capsule project captures the most important features of Santoni’s technology—versatility, sustainability, and technical performance.

The target of the Santoni-Lenzing venture is to further sustainability and efficiency while at the same time up the ante in product performance.

Lenzing fibers, derived from wood, possess some of the most sought-after properties, including high levels of softness and strength, and an exceptional ability for moisture transfer—key features of the den/IM shoe and backpack.

Santoni Spa, known for its seamless knitting and speedy, efficient, reliable construction, used two machines for these projects—the X Machine, developed for footwear, and Mecmor, the only machine on the market with needle-shifting movement.

The electronic X Machine supports 3-D patterns and can knit countless intarsia items for seamless shoe uppers. It maps different areas according to types of yarn, producing a final product ready for application of the sole. Mecmor’s versatile Variatex technology produces a variable fabric panel for weft-knitted garments. Its many feeds allow for high capacity in short times, and fabric scraps are almost non-existent.

Urging India to rethink its trade barriers, tariffs and regulations to become a hub for innovation and production, US Ambassador Kenneth Juster emphasised on the need for India and the US to see trade relations as an important strategic element of their ties. He particularly emphasised on the barriers in the technology industry, including a Reserve Bank of India (RBI) order telling technology companies to base all their servers in India. Juster warned that the issue that had become one of a growing number of economic differences between New Delhi and Washington over the past few months.

India agreed this month to defer its plan to hit the US with retaliatory tariffs worth $ 235 million on 29 American products till late September. This was in response to the U.S. raising tariffs on steel by 25 per cent and aluminum products by 10 per cent, which India has failed to get a waiver on. The US is also pondering over the issue of cancelling India’s Generalised Systems of Preferences (GSP) status over the tariffs issue.

Luxury brands are investing in China. Increasing spend by cash-rich Chinese millennials is prompting brands to revamp some stores and open new ones in second- and third-tier cities where luxury spending is growing faster. Youngsters account for around 30 per cent of the sector's sales. Millennials from the middle and middle upper are absolutely not hesitant to buy luxury brands.

Armed with family money, 20 to 34 year-olds start buying luxury brands at a young age and purchase more frequently, splurging on everything from jewelry and fashion to cosmetics and handbags. Revenue growth in China's luxury segment was around 15 to 20 per cent for the first half of the year. Chinese luxury shoppers represent almost a third of the global luxury market.

The share of luxury purchases made in China is rapidly increasing, spurred by price cuts from top brands after import duties were cut on some goods and buying products from overseas websites and vendors was made difficult. Price of luxury goods in China, previously significantly higher than in Europe and the United States, have been gradually falling. Taxes have also been lowered by seven to 17 per cent, allowing firms to cut prices.

To capture the rapidly growing millennial market, global names are increasingly moving further afield from China's first-tier cities - the previous engines of growth.

Pakistan’s textile exports dropped 16.1 per cent in July 2018 compared to shipments recorded in June. On a year-on-year basis, textile exports in July fell half a per cent compared to July 2017. Textile exports roughly make up 60 per cent of Pakistan’s total exports.

One reason for the dip is the reduction in tax rebates that made things unviable for textile producers. Right now the industry is operating at five per cent profitability. It is also a fact, though, textile exports tend to fall in July as exporters try to increase exports in the closing month of the earlier fiscal year, which is June.

Pakistan recently adjusted its exchange rate by letting the currency weaken, but it won’t impact national exports. Pakistan’s textile production faces high input costs due to imports, which dilutes the impact of the depreciation on the textile industry. High quality raw material is imported by brands. Chemicals are imported while energy requirement is also generally met by diesel imports.

The textile sector hopes for better exports in winter when consumption increases in the west due to the cold weather and Christmas. Exports are also sought to be hiked by improving localisation and quality of raw material as better brands import better quality cotton to meet their requirement.

As per a deal worth over $10 million between the Australian Alpaca Association (AAA) and MUSIAD Sydney, a Turkish business organisation, a large number of live Australian alpacas will be exported to Turkey for genetics. These alpacas would also be sent to Turkey for scouring and processing into textiles. At present, the fleece is sent to mills in New Zealand for scouring before it can be made into yarns and garments.

The Millpaca stud farm in NSW, Australia produces about 10 tons of fleece each year. According to its owner, and AAA president, Ian Frith, the export deal was a great opportunity for producers as it would help their country, which is the fourth biggest textile manufacturer in the world, boost its breeding herds. The Australian alpaca farmers would be able to explore different markets outside its country and put more value-added products into countries close to Turkey.