The virus outbreak could augur well for the Indian subcontinent, especially India with orders being diverted and demand for Indian cotton, leather increasing in the international market.
The Coronavirus outbreak has caused huge concerns in the worldwide financial markets. Shares of Chinese brands declined 9 per cent, while Italian brands are expected to fall by 1.8 per cent in the first half of 2020. Several high-end Italian brands have shut their Chinese stores, stoking concerns about the industry losing significant amount of sales if the virus is not contained quickly. Carlo Capasa, Head of the Italian national fashion chamber CNMI, fears the virus outbreak could result in a loss of 1.8 per cent to the industry’s turnover during the first six months of the year. As a preventive measure Italian brand Ralph Lauren Corp shut about half its 110 stores in China, while Tiffany & Co, closed 70 of its 240 shops on government orders.
Adverse impact on Australian wool auctions
Coronavirus has also adversely affected Australian wool auctions. The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) lost 28ac or 1.8 per cent last week to close at 1548ac clean/kg. The EMI in US dollars (USD) was pushed even lower by a substantially weaker Australian dollar (AUD). Once again, overseas manufacturers using USD to buy wool were recipients of a much cheaper buy price.
Turkey emerges most preferable and profitable market
The virus outbreak has halted apparel production in several provinces across China as people are no longer able to leave their homes. This is pushing them to find alternative markets for manufacturing apparels. One emerging market is Turkey known to be one of the most preferable and profitable markets due to its impeccable quality and fast production at affordable prices. Most brands and chain stores are expected to switch their operations to Turkey soon.
Orders diverted from China to aid Bangladesh industry
The Indian subcontinent including countries like Bangladesh, India, Pakistan and Indonesia are likely to enjoy rapid growth momentum due to increased demand for raw materials. In particular, Bangladesh is likely to gain as immediate orders from China are likely to shift to the country. However, the country needs to quickly back up its alternative resources forecasting potential demand. Some upcoming exhibitions may also be shifted to Bangladesh in order to attract foreign visitors to the country. This may open future business opportunities for the country.
A boon for the Indian industry
On a positive note, the virus is proving to be a boon for Indian industry, as it would enable Indian exporters to target markets that were earlier dominated by Chinese exporters. If China is not able to pick up production in 30 days, its main clients in Vietnam, Cambodia, Thailand, South Korea and the European Union could turn to India for buying finished goods, clothing and fabrics. As the fourth annual state of fashion report by The Business of Fashion and McKinsey & Company, the Indian clothing market is expected to be worth $53.7 billion in 2020, making it the sixth-largest globally.
This surge would also make the Indian textile industry more buoyant. Cotton stocks in the country are expected rise to 16 per cent of the total global inventory this season. Last year, India exported 800,000-900,000 bales of cotton to China. During the first four months of the cotton year (October-January), 600,000-700,000 bales were shipped to China while an additional 300,000 bales are expected to be exported soon.
Currently, India exports $223 million of leather tanning and dyeing extracts to the global market. If China’s exports of these goods are affected, the Indian industry may fill this gap and look profitable. However, it will take some time for India to match its Chinese counter parts as Indian traders do not have the same type of self-discipline, mobility, scale and scope offered by China.