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One of the most significant sources of China VSF industry, Cotton Linter Pulp or CLP used to play a critical role but it has been waning of late. At its peak, CLP capacity surpassed 2.15 million and more than 40 enterprises offering it but volumes have decreased in recent years, and made up only around 1.3 million tons/year till the end of 2016. CLP has been a major raw material for viscose fiber for years and it comprised 70 per cent of China's pulp supply before 2006. But its now struggling to survive. Besides further increase of imported Dissolving Wood Pulp (DWP) is affecting CLP made up less than 10 per cent of total pulp supply in China in 2016.
CLP is facing tough times primarily due to competition as its being replicated due to quality issues. CLP is made from cotton linter and cotton linter a byproduct of cotton whose production is correlated with cotton output. With declining cotton production in recent years, cotton linter supply too is tight. Then there are sustainability issues the scale of Chinese CLP companies is largely smaller compared to DWP enterprises, with annual capacity of no more than 100 kt and running intermittently. The black liquor made during production is a global issue. Only a handful of big companies barely meet the sustainability standards as they could ramp up their technology. Then there is the cost factor. CLP production cost has been increasing. In 2016, low-quality cotton linters for staple-grade CLP was more than 5,000yuan/mt up from 3,000yuan/mt. It is remarkable that waning CLP in the article mainly targets at viscose-grade CLP.
Soorty Denim, a well know integrated denim manufacturer from Pakistan, has been given the Hightex innovation award for its new Denim Active concept at the Keyhouse event, during Munich Fabric Start last month. The new concept dims the border between casual wear and sportswear, linking the two lifestyles.
“Denim Active” contains Coolmax eco-made® fiber which ensures moisture management and is made from 97 per cent recycled resources such as plastic bottles. While working out, body temperature increases, Coolmax helps to evaporate sweat, it keeps cool and dry. The 360 degree stretch in a light weight fabric allows one to make free body movements. Denim Active is soft and comfortable yet still maintains the actual denim look and feel in a specially engineered second skin silhouette.
The new Keyhouse is a revolution and proficiency centre for textiles, presenting future-oriented and business-related concepts in a concentrated manner. This collaborating trade fair format forms a backdrop for smart textiles, future fabrics and technologies, with a high degree of integration in textile products and high fashion. Pioneering showcases, sustainability and new technologies are put in the spotlight in this trade fair area in the context of cross-sector macro trends, rounded off by expert workshops and seminars on trends, technology, finishing and research.
Japanese casual clothing retailer Fast Retailing dismissed any chance of their company making products in the US in spite of President Donald Trump's repetitive calls for manufacturers to produce there. Tadashi Yanai, chairman and president Fast Retailing, made the remarks despite calls by US President Donald Trump for American and foreign companies operating in the United States to manufacture in the country. He also added the company's logistics system is a key issue for its US operations, adding Fast Retailing can open outlets at a pace of 20 to 30 a year.
Yanai says Trump administration's moves would not do US consumers any good, as local production for his firm is impossible at customer-friendly prices. He added, they will pull out of the United States if forced to engage in local production. Yanai further added even if Trump directly called on Yanai's company to build a plant in the US, as he did with Toyota Motors, Fast Retailing would not be able to manufacture at costs that enable attractive price points for customers in the US. He is confident about consumers coming to Uniqlo stores if they provide products that match their lifestyle.
Yanai said the company's strategy will include opening outlets in areas around Silicon Valley on the West Coast and large cities on the East Coast, including New York and Boston. While closing existing outlets in large shopping malls on city outskirts. Yanai also stated Fast Retailing has started studying the possibility of using aircrafts to move products in the US as well as building a new logistics center. He explained bringing US operation to profit may take time, citing rival H&M as an example. Even though swift growth of online retailers, including Amazon.com, has significantly muffled brick-and-mortar operators in the US.
The United Arab Emirates (UAE) has assured Bangladesh knitwear manufacturers of taking care of their demands along with an increase in export volume to the Gulf country. Saeed Bin Hajar Al Shehi, UAE Ambassador to Bangladesh gave the guarantee when a five-member team of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), led by its acting president A H Aslam Sunny, met him at his office.
Numerous subjects and questions regarding knitwear export to the UAE from Bangladesh were discussed at the meeting. Sunny informed the ambassador about latest developments in knitwear businesses between the two countries. UAE now imports knitwear worth $3.50 billion annually from various countries across the world.
Bangladeshi manufacturers may tap the huge opportunity in the UAE’s knitwear market as local manufacturers export goods worth $100 million only at present. Demand for diversified attires in the UAE will continue for a long time since 62 per cent of its population are young and middle-aged. Sunny pointed out that the BKMEA is looking to enlarge its market in the Middle Eastern countries. He urged Hajar to ease visa regime for readymade garment exporters.
Growth in India’s apparel exports may stay muted for a consecutive year in FY17, as demand from key importing countries remained subdued. With global apparel trade dipping by one per cent to $432 billion in 2016, apparel exports, according to the Apparel Export Promotion Council’s (AEPC’s) estimates, are likely to close at $17.3 billion in 2016-17, up by roughly two per cent from $16.9 billion last financial year. The industry clocked exports worth $15.5 billion from April 2016 to February 2017, a growth rate of just 0.6 per cent over the last year, reveal AEPC figures.
Slow demand hits exports The major reason for the dip is low demand from importing countries. Exports in value terms declined, following an increase in the share of man-made fibre-based apparels, which are lower in value vis-à-vis cotton apparels. This in turn was caused by improved competitiveness of polyester vis-à-vis cotton in the past few years, says ICRA.
Apparel exports to the US grew two per cent in 2016. While this growth is modest compared to previous years, growth quantum is satisfactory in the backdrop of a one per cent decline in import quantity. Explaining the situation ICRA says in its March update that apparel export quantity to the European Union (EU) is estimated to have grown six per cent in 2016, compared to five per cent in total apparel import quantity of the EU. ICRA report suggests given the weak trend in global apparel trade, domestic market-focused apparel manufacturers are expected to perform relatively better than exporters for second consecutive year in FY17. However, with temporary pressures being observed in domestic consumption owing to demonetization, the gap between growth rates is likely to narrow significantly. Thus, compared to an estimated revenue growth of 10 per cent for domestic market-focused players, the revenues of exporters are expected to grow by nine per cent in FY17 for the entities in Icra's sample set," it said, while adding the operating profit margins of the domestic market-focused apparel manufacturers remain higher than the apparel exporters.
In FY16, too, domestic players had reported a much higher growth rate of 14 per cent vis-à-vis six per cent growth rate achieved by exporters. Overall, FY16 and FY17 have been years of weak growth for apparel manufacturers compared to the recent past, wherein the revenues of both apparel exporters and domestic players grew at a CAGR of 13-14 per cent during 2011-2015 said the report.
"Almost half of the 46 textile factories at the Khurrianwala industrial estate outside Faisalabad have gone out of business over the last several years —owing mostly to severe energy shortages in Punjab, suggest media reports. Others are operating at far below full capacity. There needs to be a paradigm shift in government policies to bring about transformation, say experts. Khurram Mukhtar, Owner of Sadaqat, was able to survive energy shortages by investing in expensive, alternate sources."
Almost half of the 46 textile factories at the Khurrianwala industrial estate outside Faisalabad have gone out of business over the last several years —owing mostly to severe energy shortages in Punjab, suggest media reports. Others are operating at far below full capacity. There needs to be a paradigm shift in government policies to bring about transformation, say experts. Khurram Mukhtar, Owner of Sadaqat, was able to survive energy shortages by investing in expensive, alternate sources. Not everyone could bear the high cost of alternate power generation. So they closed down to avoid losses as customers turned to other textile producing countries in the region. If the closed factories start functioning at full capacity, they can easily double textile exports from Khurrianwala industrial estate alone to $3bn in no time, claims Mukhtar.
Cause for worry
Power and gas are now available to the industry round the clock, the cost of export refinance is at historic low, banks are flushed with liquidity, and the prime minister has announced a Rs 180 bn package to lift textile exports. Still no one is investing in textile manufacturing. Ajmal Farooq, Chairman of the Faisalabad-based Pakistan Textile Exporters Association feels these are tough times for Pakistan’s textiles industry. The industry’s competitiveness in global markets has in the recent years been eroded by higher-than-regional average cost of electricity and the liquidity crunch it has been facing owing to the delays in the release of export refund claims worth billions of rupees.
Some people say power supply has indeed improved but price has also doubled to Rs 12 a unit — much above the cost in competing countries like Bangladesh, and the entire bill of expensive gas imports has been passed down to industrial consumers in Punjab. On top of that massive working capital of textile exporters has been held in sales tax, custom rebate and income tax refund regime, increasing their financial stress. No payment has been made to exporters against the RPOs (refund payment orders) issued since July 1, 2016, despite the law that money should be refunded to the holders of RPOs in 72 hours of their issuance. With 10 per cent of companies’ sales flowing into refund regime, how can they survive. According to exporters, ‘refund money’ should be parked separately by the FBR and must not be shown as part of its tax collection.
Calling it the worst phase, Sohail Pasha, exporter from Faisalabad, highlighted that the government has zero-rated the textile industry. Practically, companies continue to pay myriad of taxes that are never returned. For example, the government hasn’t zero-rated energy fuels like coal, furnace oil, etc. Apart from paying international price for gas, they are also being charged for the inefficiencies of the SNGPL. Although the Economic Coordination Council (ECC) had decided that the consumers will pay only actual UFG (unaccounted for gas), but they are being charged SNGPL’s average UFGs. Last but not the least, the Punjab Revenue Authority (PRA) is taxing their exports separately. In all, the exporters are paying 11 per cent of their sales in unrefundable taxes. These taxes are the hidden costs that they cannot export.
Government subsidies no relief
Exporters are not optimistic about the Rs180 bn export enhancement package announced by Nawaz Sharif last December. The package allowed 4-7 per cent rebate to textile exporters across the value chain rewarding value-addition. Besides, import of cotton and machinery was also made duty-free to encourage investment.
PTEA secretary Azizullah Gohir says, the finance division is yet to allocate funds for rebates the package promises to help the industry cut its costs and get back to its feet. No exporter has so far been paid any single rupee although they already have partially passed the benefit to their foreign buyers to book orders. There is no clarity either if the government is going to pay what it promised.
High prices always result in a market taking a huge hit and Karur’s home textile mart seems to be reeling under it. Surprisingly, it is not demonetization but the government’s export policy, which is to blame for the crisis. The biggest downturn is the struggle for regular export business, as orders are not being met. Prices of yarn have crossed 35 per cent and this has put a spook in the wheels of the Rs 4,000 crores Karur textile market. Explaining the situation M Nachimuthu, Karur Exporters' Association president says even if it is made available, the price of lower count yarn is very prohibitive.
Exports businesses ply with fixed prices, which are pre-discussed and valid for the entire year. Once contract is made with overseas clients prices cannot be changed. With other cheaper markets like Pakistan and China making inroads, the leading home textile market in Karur is taking a hit. It is time for the government to rectify its pricing and policies. High yarn prices are affecting India’s position as a global leader of home textiles.
Currently, production units use higher count yarn to meet contractual obligations of their overseas clients. If spinning mills do not have sufficient cotton then it could spell disaster for the looms. The association is now worried that the premium being put on exports is eating into domestic market. Unable to meet commitments, many sellers are now facing a financial crunch. The Central government needs to step in to check rising prices of cotton yarn.
Vietnam has seen an increasing in FDI from China in the first two months of 2017, reveals Foreign Investment Agency (FIA) data. In January and February Chinese investors have registered to implement 123 projects. Among the the Chinese investments during the period is the $220 million in Billion Vietnam polyester synthetic fiber plant in central Tay Ninh province.
As per local economist Le Xuan Nghia Chinese investments are likely to continue. In fact, this trend would spill over into other Southeast Asian countries such as the Philippines, Malaysia, and Thailand. The reason: Vietnam is participating in the Trans-Pacific Partnership free trade negotiations.
Chinese investors have been pouring their money into giant projects in Vietnam and China has become the second largest FDI contributor to Vietnam, after Singapore. In the January-February period a total of $721.7 million came to Vietnam from Chinese FDI. In the two-month period, FDI investments in Vietnam were up 152.78 per cent year-on-year and investment in textile plants now accounts for 21 per cent of the country's total FDI. Chinese investment in Vietnamese textiles will enable Vietnam to have more advanced technology in their textile plants.
The 33rd India Carpet Expo (ICE) was held in New Delhi March 27-30-2017. Touted as the biggest expo on carpets in Asia, it showcased diversified, quality designs that local artisans can produce. Minister for Textiles, Smirti Irani, inaugurated the Expo which had 300 exhibitors showcasing their fares and getting access to some of the best markets in the world. The cottage industry for handmade carpets and rugs has already revived the sagging fortunes of generations of weavers and handicraft looms that spin the oriental magic of carpets.
The Expo’s popularity saw 410 international buyers visiting the show. Business was expected from Australia, Canada, Brazil, Singapore, South Africa, UK, USA, Russia and Mexico. Virender Singh, MP, Bhadohi said they are planning to provide special privileges to shepherds for the first time, as they play a crucial role in the process of carpet manufacturing. Until now all the focus was only on weavers and manufacturers but now they are looking at upliftment of shepherds as well.
ICE is an ideal platform for international carpet buyers, buying houses, buying agents, architects and Indian carpet manufacturers and exporters to meet and establish long term business relationship, feels Mahavir Pratap Sharma, Chairman, CEPC. Markets like Europe and US absorb most of the exports of handmade carpets and rugs Made in India. The labor-intensive industry looks forward to more material gains as ICE continues its efforts to provide roof and earnings to the carpet makers and shepherds.
European importers are poring over the new alliance schedules to work out which ones best fit their supply chains.
For many UK clothing retailers, Bangladesh continues to be one of the most important sourcing locations, but its principal port, Chittagong, is unable to handle deep sea mainline Asia-Europe vessels. Shippers are reliant on feeder connections between the Bangladeshi gateway and Colombo in Sri Lanka.
However, the source told the port call rotation of THE Alliance’s Far East-Europe 5 (FE5) service, the only one to call at Colombo and which has London Gateway as its last port of call after Rotterdam, Hamburg and Antwerp, meant the service was simply not suitable for the faster transit times required by clothing retailers.
The importer retailer told perhaps that it is due to a call further up the route in Asia, and that there are a lot of shippers in Northern Europe who are taking cargo from there – time will tell whether the carriers revisit that decision. At the moment, it [the FE5] is useless for us, but if in six months the rotation is changed then we will be happy to look at it again.
The FE5’s elongated transit time between Colombo and the UK will also work to the detriment of Sri Lanka, which itself has a sizeable clothing and textile industry.
At the recent Brexit seminar organised by the Freight Transport Association, the chairman of Sri Lanka’s Shippers’ Council, Michael Joseph Sean van Dort, said the UK represented a $1bn market for the island, with 10% of its exports bound for the UK.
He added: “Articles of apparel make up our biggest exports and 41% of them are shipped to the UK. Sri Lanka has competencies that Britain demands,” he said.
