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Export orders from India are being cancelled or deferred. This is true especially of supplies of material like cotton yarns and fabrics. The spread of COVID-19, especially in the United States, and leading markets of Europe like Spain, Portugal, Italy and even the United Kingdom has stopped order flow from these countries on a large scale. Buyers and major retail shops importing home textiles from India have put further business on hold. This has caused considerable anxiety among exporters as production has been cut back and fears of layoffs loom large. Exports are expected to decline by over 40 per cent in the coming months if the situation does not improve in the next 15 or 20 days.
Some measures which may support the ailing textile industry which has a significantly large dependence on the international market are extending the RoSCTL scheme to cotton yarn and fabrics so that India’s export competitiveness is enhanced; extending the interest subvention of three per cent beyond March 2020 and also covering cotton yarn within that to ease the financial burden; expediting GST refunds; and urgent policy interventions in order to provide fiscal relief and ensure credit flow.
The virus is spreading rapidly not only in China but other parts of the world including India.
Yarn traders in Guangdong, Jiangsu, Zhejiang, etc say demand for imported cotton yarn over the past week have declined. Demand for yarn from countries like India, Vietnam, Pakistan and other national combed yarn, OE yarn fell slightly larger than the high combed yarn due to its unsatisfactory shipping
Some cotton yarn importers and middlemen have been on the brink due to increasing prices in recent years. However, prices have fallen below 58 cents / pound with the ICE cotton main contract with the price of cotton yarn CNF (or FOB) dropping more than ever in Vietnam, India and Pakistan. On the other hand, Zheng cotton has fallen below 11,500 yuan / tonne, and the downstream textile and garment enterprises have resumed their work and resumed production.
The progress is relatively slow (the main consumer group of imported cotton yarn is small and medium weaving enterprises in coastal areas), and domestic cotton yarn is only a flash in the pan. Since March, a small diving mode has been opened. Up to now, OE yarn has been lowered by 200-300 yuan / tonne, and the price of the ring combed and combed yarn has dropped by 300-500 yuan / tonne.
Data from TexPro shows, global trade of the worn clothing and other worn articles has declined by 6.92 per cent from 2017 to 2019. The global trade of worn clothing and other worn articles was worth $7,656.65 million in 2017, which dropped to $7,126.98 million in 2019. Total trade of worn clothing and other worn articles has reduced by 12.34 per cent in 2019 over the previous year and is anticipated to slash to $6,415.79 million in 2022 with a rate of 9.98 per cent from 2019.
The global export of worn clothing and other worn articles was $4,853.56 million in 2017, which declined by 7.10 per cent to $4,508.77 million in 2019. Total exports diminished by 10.07 per cent in 2019 over the previous year and is expected to curtail to $3,989.07 million in 2022 with a rate of 11.53 per cent from 2019.
The global import value of worn clothing and other worn articles was $2,803.10 million in 2017, which decreased 6.60 per cent to $2,618.22 million in 2019. Total imports cut by 15.99 per cent in 2019 over the previous year and is expected to weaken to $2,426.72 million in 2022 with a rate of 7.31 per cent from 2019.
Countries like Vietnam, Cambodia and Bangladesh continue to rely heavily on China for intermediate inputs like raw materials and unfinished goods and services. Once the stock imported from China is depleted, global textile and apparel industry is expected to face the brunt of supply chain disruption. Fast-fashion retailers, who rely on releasing new lines every few weeks and holding as little stock as possible, would be particularly vulnerable to supplier disruptions. China is gradually resuming manufacturing after weeks of factory shutdowns and logistical restrictions, but the impact on global apparel firms may continue for the foreseeable future as the virus spreads.
Many businesses were shifting manufacturing to Vietnam, Cambodia and Bangladesh even before the virus struck China due to rising labor costs and uncertainty around the US-China trade war.
In the fourth quarter of 2019, US imports of apparel and textiles from China fell by 25.4 per cent year while rising 14.3 per cent from Cambodia, 8.6 per cent from Bangladesh and six per cent from Vietnam. The pattern continued in January with Cambodian exports to the United States rising by 23.8 per cent compared to a 31.7 per cent slump in shipments from China. But China may still remain the top supplier once it recovers from the outbreak.
The likes of H&M, Zara and Mango have halted production. With sales plummeting and store closures are happening manufacturers are facing daily order cancellations. H&M has for now closed stores or will close in the US, Germany, two of its key markets, Canada, Portugal, Belgium, Switzerland, Greece, Slovakia, Lithuania, Peru, Ukraine, the Philippines, Malaysia and Cyprus. Inditex has temporarily closed 3,785 stores in 39 markets.
Since these apparel brand have halted production, vendors are at a loss for their next step—and others in the supply chain are at risk of losing their jobs as evaporating orders will see some factories hard pressed to pay their workers. If there’s any light at the end of the supply chain’s present tunnel, it will take a quick turnaround of events and a lockdown lift in the next couple of weeks that would see spending and production start to pick back up. Both situations, however, may be unlikely to unfold in short order. Beyond stalled production, the worry now is whether manufacturers will get paid. As a consequence of the substantial drop in global demand, they are now carefully scrutinizing and evaluating how to adjust and mitigate negative effects, both from a cost and risk perspective.
Everlane plans to use only certified organic cotton by 2023. Two years back, Everlane began sourcing ethical cotton from Madhya Pradesh. Now the brand will up its use of the region’s cotton, which is certified organic. The new commitment will begin with organic cotton T-shirts--a homage to the brand’s debut T-shirt launched in 2011.
US-based Everlane, is known for its ethical brand promise -- including its radical transparency policy regarding the pricing and sourcing of its products. Everlane, launched in 2011, has a revolutionary message about material and supply chain traceability. The organization works with brands and manufacturers to improve operations throughout their supply chains. The brand has mindful of its impact on the environment through the materials and processes it uses. Previous environmental efforts include: a pledge in 2018 to eliminate all virgin plastic from its supply chain by 2021; launch of an eco-friendly footwear line in 2019, et al. All silk produced by Everlane will be dyed and washed with 100 per cent recycled water and 100 per cent renewable energy by 2022.
Cotton farming uses more toxic pesticides per acre than any other crop worldwide, damaging local groundwater, streams and rivers and endangering local people and wildlife.
As garment factories stall because of the coronavirus or shutter production lines because of raw material shortages or reduced orders, garment workers come under heavy pressure.
Garment workers earn poverty wages that barely cover their basic needs, let alone tide them over for emergencies or periods of unemployment. Whether temporary or permanent, the economic fallout from these factory closures will have far-reaching consequences for garment workers living in precarious circumstances. If workers are laid off, they have to fight for their dues. Migrant workers, specifically, may face further isolation or xenophobia.
The situation is especially precarious in Cambodia and Myanmar, where tens of thousands of garments workers have lost their jobs in the wake of supply-chain disruptions or production slowdowns. In Cambodia, factories have cut off workers without authorization, leaving many in debt and unable to afford monthly loan repayments. Because many facilities in Myanmar opened within the past five years, and the turnover of workers is significant, many workers will be left with nothing.
The coronavirus pandemic is upending supply chains, roiling financial markets and straining medical infrastructures across the globe. In addition, when factories reopen, deadlines should be reassessed to prevent laborers from working mandatory overtime to make up for delays.
According to Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, apparel exporters are expected to report a moderate profit this fiscal, with pressures likely to sustain at least in the near term and the turnover growth to be subdued, except for a few larger players with an established client base.
The industry is facing challenges such as increased bargaining power of buyers amid intense competition, cost-side pressures emanating from disruptions in procurement of materials and consumables (such as colours, chemicals, accessories/ trims, etc) from China and write-backs of export incentives booked previously — all of which are expected to adversely impact profitability.
In addition to sustained pressures on liquidity owing to delays in clearance of government dues, a fall of 100150 bps in operating profit of Indian apparel exporters is expected this fiscal.
This may result in a moderation in debt coverage metrics and the impact will be more pronounced for leveraged and smaller companies, with limited bargaining power with customers, modest liquidity cushion and less financial flexibility to absorb the impact.
For over 60 years, Ramsons has been a pioneer in the design and manufacture of “apparel production” equipment. The company provides technology solutions and import substitution machines for apparel making for hotels and hospitals. It recently showcased its machines at GTE 2020 fair in New Delhi Prakash Belani, Director elaborates.
Ramsons is a 60-year old engineering company that adheres to strict sustainability principles. “We reduce water consumption during the washing process by using genuine parts in our machines. We also discharge our effluents with care,” says Prakash Belani Director of the company
Catering to the demand for sewing and garment finishing machines, Ramsons offers manufacturers with inspection machines. “We cover wovens, knits and special fabrics. These fabrics can be checked before cutting and stitching. We provide special washing equipment and storage and handling systems for this. We also offer storage racks and trolleys,” he adds. Besides, the company offers accessories conveyer systems for online stitching which enables easy management of goods in the factory. It emphasises on the correct ironing technology by minimising the use of normal ironing tables. The company also offers form finishers that help it to reduce its labor cost.
According to Belani, investments in the apparel sector are declining as it is a labor intensive sector. “Buyers demand quality goods at lower prices which keeps investors away. However, the number of apparel companies across the country is increasing as we speak so is the evolutionary churn within the existing pack of industry in this given space. The good news here is that Amended Technology Upgradation Fund Scheme (ATUFS) is getting widely accepted due to the subsidies provided and this shall enable the incremental uptick in the technology, automation/ modernization and digitization in this trade going forward,” adds Belani.
A totally indigenous company, Pioneer Udyog has been participating in the GTE exhibition for the last eight years. The company has gained recognition as the noteworthy manufacturer and supplier of an assorted range of laundry equipment, crinkle machine and dry cleaning machine. Molik Mahajan, Director elaborates on the company’s operations.
"We cater to denim wear which evolves every day,” says Mahajan. Earlier the segment included only casual wear. “However now, it also includes formal wear. Its colors are evolving too from the earlier fluorescent to current dark colors,” he adds. Pioneer offer products for the medium scale industries while for the big units, it offers complete automation solutions.
Earlier, the industry focused only on making garments. Now, it focuses more on sustainability. “In compliance with the current environmental laws, brands are marketing their products as eco-friendly,” says Mahajan. The products of Pioneer Udyog too aim to conserve, recycle and minimise water use. The company believes that recycling of water is easier and cost effective than before.
However, according to a new regulation, to recycle water, companies need to first measure the level of the ground water. “They need to install a water meter which is quite expensive. Hence, we encourage customers to reduce their water usage to save their money. Earlier, only big corporates invested their money in recyling. Now, even smaller units are planning to do so. Around ten to 15 percent have already invested in recycling. This figure is likely to increase significantly in the next few years,” adds Mahajan.
