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Fashion companies are worried about the source of wood pulp used in the clothing they make. Rising cotton prices have boosted demand for wood-based fabrics such as viscose, rayon and modal, which increasingly involves clearing forests and taking land used by indigenous people. Indonesia is a major producer of wood pulp.
Ralph Lauren is the latest in a growing number of fashion companies to pledge investigation of its supply chain to determine if it is using products from the most destructive regions and stop using those sources by the end of 2017.
In countries like Indonesia, the production of pulp for fabrics has been devastating indigenous forest-dependent communities. Production of wood pulp can involve clearing forests to build eucalyptus plantations, taking land traditionally used by indigenous communities.
It’s estimated Indonesia lost 18.5 million hectares of tree cover from 2001 to 2014. When fashion brands start to take responsibility for their supply chains that can have a real positive impact for forests and the people that depend on them. H&M, Zara, ASOS, Levi Strauss and British fashion designer Stella McCartney have adopted similar sourcing policies. Last year Stella McCartney partnered with environmental non-profit Canopy to encourage clothing companies to stop sourcing fabric from ancient and endangered forests.
"All hopes rest on the fourth quarter of fiscal year 2016-17 for the textile mills to tide over tough times. The Textile Ministry's initiative to allow mills to pay only 10 per cent of procurement money has come as a breather. They feel, the move could ease production cost in the last quarter of the fiscal. Moreover, the industry is looking to orders for summer season 2017 to boost fourth quarter results."
All hopes rest on the fourth quarter of fiscal year 2016-17 for the textile mills to tide over tough times. The Textile Ministry's initiative to allow mills to pay only 10 per cent of procurement money has come as a breather. They feel, the move could ease production cost in the last quarter of the fiscal. Moreover, the industry is looking to orders for summer season 2017 to boost fourth quarter results.
Mill owners hope Q4 will not be as bad as the Q3. They are focusing more on exports which could help them boost the results. However, everyone in the industry hopes that business would pick up in the first quarter of next financial year.
Cotton pricing initiatves
While large traders and multinational cotton traders take advantage of hedging facility and cheaper funds, mills are unable to build adequate inventory and have been paying higher price for the cotton during off season. More than 75 per cent of the cotton arrives in market from December to March and around Rs 60,000 crores is required to procure seed cotton during this period. Since ginning and spinning mills do not have such funds, farmers invariably get lower price. Owing to that, the cotton textile industry had been demanding the government to ensure cotton fibre security and stability in cotton prices so that both farmers and the industry get benefits and remain competitive in the global market. With the new textile minister directing Cotton Corporation of India (CCI) that normally procures cotton only when the prices crash below minimum support price to procure cotton on a commercial basis and supply to the mills, the textile industry has welcomed the move.
The new terms and conditions of fully pressed bales of CCI facilitates registered MSME textile units to procure cotton by paying only 10 per cent deposit money as against 20 per cent which is applicable only for the sale quantity of 30,000 bales and above. “The deposit money up to 2,999 bales is only 15 per cent. This would greatly help MSME units which are starving for working capital fund in the post-demonetisation regime,” explains M Senthilkumar, Chairman, Southern India Mills' Association (SIMA).
Senthilkumar further says earlier there was a difference in the free period ranging from 30 to 75 days and 75 days free period was available for the procurement of 15000 bales and above, which led to MSME textile units' inability to derive much benefit out of CCI. “However, now the free period has been made uniform and fixed at 45 days which would again help the actual users and the MSME units,” he stated.
Hoping for the good times
Textile industry sources say, CCI might procure around 1.5 million bales and maintain an inventory of 500,000 bales so that stability in cotton price is maintained. Meanwhile, the textile industry has also been requesting CCI to opt for coastal movement of bales between Gujarat and Tamil Nadu that would again yield considerable saving for the mills, of anywhere between 10 per cent 25 per cent in freight costs.
"Raw material prices for Polyester and nylon rose in many nations, including China, due to the recent OPEC deal and short-term demand for fibers, says a new report from PCI. This mechanism will continue until producers realise there is insufficient forward demand; probably as a slowdown hits heading coming into the Lunar New Year (LNY), and if not then a few weeks after LNY. In addition to expected oil price discipline, there has been excitement at the upcoming start of an MEG futures market in China which is stoking speculative pricing."
Raw material prices for Polyester and nylon rose in many nations, including China, due to the recent OPEC deal and short-term demand for fibers, says a new report from PCI. This mechanism will continue until producers realise there is insufficient forward demand; probably as a slowdown hits heading coming into the Lunar New Year (LNY), and if not then a few weeks after LNY. In addition to expected oil price discipline, there has been excitement at the upcoming start of an MEG futures market in China which is stoking speculative pricing. Other markets, including viscose and spandex raw materials, also experienced price increases in December and Chinese exports are projected to achieve a year-end record at the end of the month.
Rising raw material prices
Polyester raw material prices, particularly those of paraxylene (PX) jumped in December, due to rising oil prices and PX capacity expectations. In Asia, PX experienced a quick rollover at $795 for the month, followed by prices that surpassed the $850/metric ton barrier. North American PX prices settled at 42.00 c/lb, which was up 1.0c/lb following the production cutback agreement implemented by OPEC and non-OPEC nations. The European PX settlement was $795/ton for December. As per the report, there are no suggestions of either PX or PTA supply issues currently in the short month of December. The expectation is of higher prices going forward but no supply issues for PX.
While Asia remains a catalyst for global benzene market, nylon raw material prices rose in December. China’s strong demand for benzene and higher crude oil prices were responsible for this price surge. PCI said current spot prices are expected to reach up to $100/ton in January. Asia’s benzene prices surpassed $115/ton, due to strong styrene demand and inventory rebuilding before the Chinese new year.
American benzene contract price negotiations ended in December with a split settlement of $700 to $703/ton, which was an increase of $33 to $45/ton over November’s split settlement. December spot negotiations also are $658/ton to $667/ton and rose approximately $100/ton over November levels. European benzene contract prices settled at $667/tonne, up from $659/tonne in November. A weaker exchange rate between the Euro and American Dollar contributed to this price jump in European nylon raw material prices.
Viscose fiber prices inched upward in December as viscose staple fiber (VSF) prices recovered. Medium quality VSF prices stabilized at $1.89 to 1.91/kg excluding VAT in November until mid-December, when medium quality VSF prices increased to $2,187-2215/tonne. VSF demand globally remains high and processors have minimized inventories to avoid harsh price changes. Many major VSF companies, including Lenzing, are also taking advantage of higher VSF demands by boosting their production capabilities. Lenzing will construct a new 90 kilotons per annum (kpta) lyocell plant in the US, which will boost the company’s VSF production to 333 kpta by 2020.
Spandex prices went up in December as Chinese exports remain robust at the end of the year. Higher spandex prices in Asia, particularly those in China, were attributed to firmer feedstock prices. China’s MDI price rose from $2.85/mt to $2.99/mt, meanwhile China’s PTMEG prices also rose from $1.94/mt to $2.09/mt. Furthermore, Chinese spandex imports have reached 60 kt, which was up nine per cent from 2015, as the nation prepares to expand its spandex sector. North America’s spandex prices remained relatively quiet, but PCI said there is optimism for next year’s market. The region’s spandex industry may benefit from the likely cancelation of TPP and international performance fabric manufacturing investments.
In Europe, spandex prices remained unchanged for December despite higher hosiery sales. “Although Chinese spandex price offers are beginning to move upwards, there appears to be insufficient strength in the wider European spandex markets to support any price drive into Q1 2017,” the report noted. “Our expectations are therefore for a rollover in mainstream pricing for Q1 2017 but some of the cheapest import offers may disappear from the market, giving a tighter price spread.”
"The global fashion industry is up for good times in 2017 amid signs of a rebound in consumer markets in Mainland China and Hong Kong. In recent past, global giants such as Prada, Burberry and Richemont had tough times operating out of Mainland Chinese as consumers scaled back spending on luxury goods amid Beijing’s anti-corruption campaign and cooling economic growth. For some luxury brands, year 2016 was one of the most difficult as fluctuating currencies, a wave of terrorist attacks across Europe and the Brexit shock led to a new era of volatility. "
The global fashion industry is up for good times in 2017 amid signs of a rebound in consumer markets in Mainland China and Hong Kong. In recent past, global giants such as Prada, Burberry and Richemont had tough times operating out of Mainland Chinese as consumers scaled back spending on luxury goods amid Beijing’s anti-corruption campaign and cooling economic growth. For some luxury brands, year 2016 was one of the most difficult as fluctuating currencies, a wave of terrorist attacks across Europe and the Brexit shock led to a new era of volatility. “Indeed, this has been one of the toughest years ever for the global fashion industry,” analysts at McKinsey said in a recent 92-page report.
Turn of events
Luxury fashion companies were likely to see annual revenue growth of just 0.5 per cent, the report said, noting that it had surveyed responses from 400 companies. Executives interviewed by McKinsey were pinning their hopes for a turnaround in 2017. McKinsey forecast sales growth this year of 3.5 per cent, up from 2 to 2.5 per cent growth in 2016. Many of them have already undertaken significant cost-cutting and restructuring exercises, and are now primed to capture the benefits.
Richemont, known for its Piaget and IWC timepieces and Cartier diamond necklaces announced job cuts, early retirement packages, and abolishment of chief executive’s position, along with retirement of eight directors in 2016. Luxury goods sales to Chinese shoppers, who make up roughly a third of global consumption, will shrink for the first time in modern history in 2016, predicts Bain. They estimated luxury goods sales in Hong Kong fell 15 per cent for the full year 2016. The drop can be partly explained by Hong Kong’s US-dollar linked currency, which appreciated in line with the US dollar’s 6.6 per cent gain against the yuan.
Hermès, traditionally among most resilient companies, said in September it would abandon its 8 per cent annual sales growth target for 2016, while German upmarket brand Hugo Boss AG in December said its 2016 operating profit would likely drop 17 to 23 per cent. Selected currency movements are affecting consumption in 2016. Brexit, the US presidential election and European terrorism all impacted consumer confidence and touristic flows, according to Bain.
Following years of retail expansion across China, top labels such as Gucci and Louis Vuitton closed some boutiques in smaller inland cities in 2016, in a bid to trim back their retail network and restore scarcity value.
A shift in focus
Brands are now focusing more on entry-level products. Richemont’s Piaget recently launched a lower priced sports line to tap into shifting spending habits, while Prada has been focusing on HK$1,000 to HK$2,000 bags. Discounts will become more prevalent in China going forward thanks to the growth in outlet malls, McKinsey said. Macquarie analyst Daniele Gianera believes luxury brands that innovate are more likely to win market share in the long run. Once customers have bought your signature line items, they want something new. Many consumers are redirecting their spending towards experiential luxuries, such as travel, entertainment, fine dining and fine art. The trend visible among US consumers for the past half decade is becoming increasingly common in China, Gianera said.
World cotton production in 2016-17 is likely to rise by eight per cent and world consumption is likely to remain stable, which may put pressure on prices in the latter half of the season. World ending stocks may fall by seven per cent in 2016-17, though stocks outside of China are expected to grow by six per cent. The current season began with lower stocks, particularly from countries in the southern hemisphere, which saw ending stocks in 2015-16 fall by 21 per cent, the lowest since 2009-10.
The shortage in supply carried through the first few months of the 2016-17 season thereby keeping prices firm. India’s cotton production is expected to increase by four per cent, making it the world’s largest producer. Polyester prices have shown an uptrend, but still well below international cotton prices, making it unlikely that cotton mill use will expand unless polyester prices continue to rise. Gujarat is one of the key producers of cotton in India.
Mill use of cotton in India is projected to decline by one per cent. Traders cited reduced arrivals and cash shortage in banks as the reason for the rally in cotton prices, whereas most believe that the rally may not continue longer on good production.
The weaving sector, particularly ones that supply goods to exporters for being shipped abroad, are almost on the verge of collapse due to government’s policies. In other words, all trading activities have come to a halt and now all weavers are at the mercy of exporters to get yarn from them. In addition to this, the financially weak exporters who were relying on traders and indirect exporters to provide them fabric are going out of business.
Addressing an extraordinary general meeting of the Pakistan Weaving Mills Association (PWMA) Asif Siddiq, a founding member said that exporters have been allowed to import yarn without duty or income tax and sales tax. On the other hand indirect exporters have to pay a 15 per cent customs duty and one per cent income tax on import of yarn, he added.
Due to shortage of cotton in Pakistan and high input cost, the weaving industry is relying mostly on imported yarn from India, China, Indonesia and Turkey. With this kind of policy, the government has taken the indirect exporters out of the market, he added.
The government needs to deal with direct and indirect exporters in an even-handed way and consult all stakeholders before making policies. Siddiq hoped that the textile package about to be announced by the government should address this issue. At the same time, he demanded, the government should immediately release sales tax refunds so that the textile sector can come out of its financial crisis, which he attributed to delays in the payment of refunds.
Cheaper yarn from Vietnam has emerged as a threat to Pakistan’s spinning industry. Vietnam's yarn industry had grown threefold in the last four years while its yarn exports are growing by 40 per cent a year. Industrialists in many countries are relocating their units to Vietnam while China continues to invest heavily in the textile sector of that country, which is expanding their capacity at a fast pace.
Pakistan has already lost a big share in the international clothing market to rivals such as Bangladesh. The country’s textile exports have continued to fall since 2009-10 with added momentum in the last three years.
The export sector in Pakistan has demanded refunds should be paid to lure international buyers who have decided to do business with Bangladesh, China and other rivals. Exporters say it’s just the GSP plus status that has helped Pakistan to remain in the international market. Otherwise the country’s products would have been nowhere. The Generalised Scheme of Preferences-Plus provides zero-duty market access to Pakistan’s products, including textile and clothing, into the European Union.
Pakistan’s textile exports declined by 0.5 per cent in November 2016. Exports of basic textiles fell by 1.9 per cent year on year during the first five months of the current fiscal.
Nordics live is in the forefront of sustainability and now ‘Velour by Nostalgi’ has the label to prove it. The Swedish menswear brand received a Nordic Ecolabel license for its Svanen jeans. This means that the particular jeans meets 99 per cent of the demands of Nordic Ecolabel.
Launched in 1989, the Nordic Swan Ecolabel serves as the official Nordic Ecolabel given out by the Swedish government through a non-profit and state-owned organization called Ecolabelling Sweden. The label strives to help consumers shop with the environment in mind and bolster sustainability.
Benefits of the denim include no dangerous chemicals, toxins, endocrine disruptors, or heavy metals, better working environments for factory workers, less production pollution, and better fabric. Velour by Nostalgi debuted in producing sustainable denim in August 2016. Per Andersson, Founder of Velour by Nostalgi said his company wants to offer and help end consumers make better and more sustainable choices. The Svanen Ecolabled jeans come in five washes and two silhouettes, a loose 90s fit and a regular fit. They will be available online starting from February 13.
In its newly published report, Transparency Market Research has studied the global socks market in detail. The report titled ‘Socks Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast 2015 - 2023,’ states the socks market is expected to progress from $5.6 bn in 2014 to $11.6 bn by 2023.
The global socks market is expected to exhibit an 8.50 per cent CAGR from 2015 and 2021. Considerable growth in the retail sector, constantly growing men’s apparel industry and improving fashion trends are responsible for the growth of global socks market.
Socks, one of the common consumer goods, are available in global market in many materials and varieties. In recent years, due to the introduction of luxury socks, they have been considered more as fashion products than common consumer goods. Even though socks account for a smaller share in the global apparel market, their demand is expected to increase considerably in the years to come.
The rising boom in global socks market has allowed new companies to introduce their products. Increasing per capita income in various countries has enabled the global socks market to become the fastest growing market in the global apparel market.
The Transparency Market Research report divides the global socks market on the basis of region, gender, product, and material used. On the basis of product, the global socks market is classified into specialty socks, athletic socks, trouser socks, casual socks, women’s socks, and others. The demand for athletic socks is expected to be the highest in the global market due to the increasing demand for athletic shoes. Going forward, the increasing pool of consumers participating in sports is expected to boost the athletic socks segment.
Last December, PVH Corp along with its Tommy Hilfiger brand signed with the UN Global Compact, a massive initiative aimed at harnessing business’s role in global sustainability. The UN Global Compact is a platform for the development, implementation and disclosure of responsible corporate practices.
The initiative has enlisted more than 9,000 corporate members 3,000 non-business signatories based in 160 countries around the world to lead change on the global sustainable development agenda by aligning their operations and strategies with 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption.
Last year, PVH marked the 25th anniversary of its code of conduct for business partners. Titled ‘A Shared Responsibility’ the code of conduct helped the outfit pioneer new practices in social compliance when it first launched in 1991.
The company recently launched an enhanced global corporate responsibility strategy focused on empowering people, preserving the environment and supporting communities. PVH’s strategies supports many of UN’s 17 Sustainable Development Goals such as building safety, chemical management, greenhouse gases, inclusion and diversity, and supporting the needs of women and children. PVH and Tommy Hilfiger are also working with the UN’s CEO Water Mandate, which is committed to safeguard and preserve water resources.
Founded in 1881, Phillips-Van Heusen Corp.(PVH), owns brands like Tommy Hilfiger, Calvin Klein, Van Heusen, Izod, Arrow, Warner’s and Olga. The company also holds the license for Speedo brand.
