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Falling demand from China for cotton and cotton yarn has hit Indian exports as there has been a 20 per cent decline in cotton prices in financial year ’15. China’s decision to liquidate cotton stocks has been an inflection point for the world cotton trade and has led to a glut in the cotton market with exporters facing waning demand.
As the Chinese off take has slowed down, the Indian government has asked exporters to focus on markets like Latin America, the CIS countries and Africa. However, the focus market scheme and additional incentives have been withdrawn and duties on yarn, fabrics and garments are making India less competitive against Vietnam and Pakistan.
India has a big opportunity to increase domestic manufacturing of value-added products and grow exports in textiles if the government gets proactive on some issues faced by the exporters. Import and central excise duties on manmade fibers are hurting the export competitiveness of Indian synthetic yarn. The duties can be reduced. The yarn industry has to get raw material at lower rates. The government also has to liberalise tariffs on textile exports by signing free trade agreements with markets like European Union and China to make Indian exports competitive in the international market.
The US is the second major destination of Bangladeshi garment products after the EU. Bangladesh’s earnings from export of readymade garments to the US were up 2.85 per cent in fiscal year 2014-15 compared to the previous year. But there has been continuous fall in growth in the last two years. In financial year 2013-14 readymade garment exports to the US rose by 2.9 per cent, sharply down from 10.31 per cent in 2012-13.
Low demand, increased competition, political unrest and rise of production cost due to implementation of factory compliance are responsible for the slow-down. Buyers could not come to Bangladesh to place orders and further business negotiations because of the political turmoil. It hampered the export growth to a major destination.
The new challenges of competition from countries like Vietnam and Cambodia have caused a slowdown in export growth. Orders are being shifted to new competitors like Vietnam which can avail of the duty-free facility to the US market after signing the much anticipated TPP deal.
Another reason is increased production cost due to the compliance process. Although production costs have risen, prices haven’t, making Bangladesh less competitive in the global market. Myanmar, the emerging exporter of readymade garments to the US, has posted a 123 per cent growth in the first four months of this year.
Export performance of the Tirupur knitwear industry shows that it has grown considerably in recent times. It grew by 15.5 per cent in the fiscal year 2014-15 touching Rs 21,000 crores as against 18,000 crores in 2013-14. And this trend is expected to continue as India is the chosen country due to its abundance of raw materials and skilled workforce. Motivated by this growth curve, three decades old garment trade company, K P R Mill has added a brown field capacity of 10 million garments and a green field capacity of 12 million garments. This totals to 59 million garments per annum. With this increase, the garment revenue rose by 34 per cent during the year.
Since the industry is set to grow further with the rise in Asia as a strong trade block for textiles and apparel exports, KPR plans to tap this potential and add a large greenfield manufacturing facility of 36 million garments per annum at an estimated cost of Rs 175 crores. Once this is commissioned the total capacity would rise to 95 million garments per year, one of the largest in the country. The project is expected to be completed during this financial year.
The company Board agreed to approve the proposal in event of the surge in orders from existing buyers and the encouraging response from the US market.
Zimbabwe is being flooded with cheap imports, mainly from China. Imports of low-priced Chinese goods have had a negative impact on the viability and growth of local clothing industry in Zimbabwe. So, textile Zimbabwean manufacturers want a complete ban on polyester knitted fabric and finished blankets entering the country. They want tariff codes that carry 10 per cent duty to be aligned with the tariffs codes that carry duty of 40 per cent. They want a level playing field with a customs duty regime which forces the imported product to be in the same price range as the local product. They want the competition to be based on quality, reliability and delivery.
Small traders want support from the government so that they can grow their businesses. Cheaper imports have made local products uncompetitive. Many textile companies are on the verge of closure as most people now prefer to import rather than to support the local industry. China gives 14 to 20 per cent export incentives. So Chinese manufacturers are able to produce goods at cost or slightly above and still retain profitability.
The textile and clothing industry in Zimbabwe was in the past considered the biggest employer after agriculture.
Birla Cellulose, the flagship company of Aditya Birla Group recently launched Liva, a New Age fabric brand with Bollywood actress, Kangana Ranaut, as its brand ambassador. Made from natural cellulosic fibres using wood pulp, a natural resource, Liva lends fluidity, comfort and fashion quotient to any piece of clothing. At the recent 61st National Garment Fair organized by CMAI in Mumbai, Birla Cellulose promoted Spring/Summer 2016 line of Liva fabrics.
These fabrics showcased innovation in line with consumer trends forecasted by international design consultants. The innovations had unique blends like modal wool, Amicor modal, Cuprammonium modal as well as dobby and jacquard structures. The company has also launched a unique concept called ‘Liva Accredited Partner Forum (LAPF)’ in March 2015. LAPF is a community of spinners, fabricators and processors, who work closely with Birla Cellulose on innovation, quality and technology to deliver Liva fabrics to consumers.
Birla Cellulose being the world leader in manmade cellulose fibre is increasingly engaging with the end consumer directly as well as through leading garment brands in India like Global Desi, Allen Solly Women, Chemistry, Pantaloons, Van Heusen, Fusion Beats, 109F and Lifestyle, among others. Liva fabrics would be made available to quality focused brands across the country. Co-promotion will also be rolled out in a phased manner through tagging for which a qualification matrix has already been worked out.
Garment exports from has gone up 4.08 per cent in fiscal 2014-15. Knitwear exports increased 3.13 per cent year-on-year while woven shipments grew five per cent. Export earnings from the apparel sector were 5.24 per cent below annual target. Over 80 per cent of the country’s export earnings come from the garment sector, which was able to reach its target of annual export earnings only once e in 2013-14, in the last four years.
Exporters blame the fall in earnings on the shipping problems caused by the political crisis in January-March. Moreover the devaluation of major currencies—dollar, ruble and euro—is also responsible for the shortfall in target. Overall exports rose 3.35 per cent year-on-year in 2014-15, though the amount was well below the year’s target. Exports surged in June, the last month of the fiscal year, an increase of seven per cent from the previous month and an 8.68 per cent growth from a year earlier.
Jute and jute products exports grew 5.34 per cent year-on-year, home textiles 1.49 per cent, and leather and leather goods 0.56 per cent. Frozen foods declined 10.99 per cent year-on-year and furniture fell 8.55 per cent in fiscal 2014-15.
Kenya wants to expand its exports to the US beyond textiles. An opportunity has been provided with the renewals of African Growth and Opportunity Act (AGOA). The US Congress has renewed the 15-year old AGOA, which grants duty free access to imports sourced from countries in Africa.
Kenya currently exports less than 10 products to the US, out of the 6,400 which have been listed under trade promotion laws. Most of Kenya’s exports are textiles produced in the export processing zones. Kenya was among the first countries to qualify for export under AGOA in 2001 and since then textiles and apparel have dominated the composition of exports to the US. Apparel exports under AGOA tripled from 2001 to 2006. Under AGOA Kenya has increased employment, provided extra income to urban and rural workers and boosted its economy.
But bilateral trade has been in favor of the US, as Kenya imports more. US exports to Kenya have generally been manufactured high value goods such as aircraft parts, machinery, electronic equipment, pharmaceuticals, organic chemicals, plastics, and fertilizers. Kenya’s exports to the US are relatively lower priced goods and commodities such as tea, textiles, apparels, handcrafts, and processed nuts.
Copenhagen International Fashion Fair (CIFF), the leading trade show for premium brands in northern Europe, has released the names of three designers who will showcase their collections at the August edition of the fair. CIFF focuses and strives to create a platform for each brand to form new and lasting relationships with buyers and press. It moves forward and forms personal bonds with the brands, creating a unique and personal environment for designers and talents to show their work and develop their brand.
One of the designers is Swedish Louise Körner. Körner graduated with honors from Istituto Marangoni in London, in 2011, launched her own brand after working for Muuse. She will show in the Sleek area for the Spring/Summer ’16 fair.
LeatherProjects, another new brand, was founded in 2011 and sells high-quality leather goods handmade in Copenhagen. LeatherProjects will also show at Sleek. The last new brand, Wilk, to show in the Lab area, was founded in 2014 by Danish designer Anna-Louise Wilk. Wilk designs for the unworried women who dare to throw themselves at life – women who insist on fun and games and who don't sit around and wait for better times.
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Egypt has halted all cotton imports in a bid to assist the production and marketing of the local crop. The market for Egypt's high-quality, extra-long staple cotton, once dubbed the country's white gold, has been in declining for years. Just six months earlier, the government had announced an end to support for farmers. It told farmers not to grow the crop unless they had contracts in place to sell it. At the time, the government felt cultivating Egypt’s long and extra long cotton, which competes with the US pima variety for high quality fibers, was too expensive. By then Egypt's own textile firms had shifted their focus to creating low-quality products with cheap raw cotton imports.
Egypt liberalised its cotton sector in 1994, exposing farmers to volatile global prices and rising fertiliser costs. Cotton acreage has fallen dramatically since the heyday of the 1960s, when Egypt produced cotton from up to 9,24,000 hectares helped by fixed state prices. Current production is barely half of that.
Egyptian cotton is regarded the world’s finest. The length of the fiber makes it possible to make the finest of yarns without sacrificing the strength of the yarn. The strength of the fiber makes fabrics more solid and more resistant to stress.
The Indian cotton textile sector which has not been doing too well for the past few years, could now see stability in current financial year. The sector would maintain an overall stable outlook led by stable spinning margins in the cotton yarn segment, range-bound cotton prices and favorable domestic and export demand.
However, the outlook for cotton yarn exporters is negative due to a slowdown in demand for yarn, particularly from China, leading to softer yarn realisations and lower capacity utilization. Unfavorable cotton-polyester staple fiber spreads have hurt substitution demand for synthetic fibers and synthetic yarn. Lower export competitiveness of Indian synthetic yarn also contributes to the subdued outlook as import and central excise duty continue on man-made fibers.
Last year, EBITDA margins for textile firms were affected after a 20 per cent decline in cotton prices. As a result inventory held by textile firms too saw lower profit margins. In the current financial year the margins could recover in the range of 10 to 13 per cent. Pakistan and Bangladesh are one of the biggest players in the textile sector. Currently, India has a small share in the global textile trade but is well positioned to gain from weak input prices and growing demand for apparels.
