FW
As the rapid spread of Covid-19 across all countries has led to the cancelation of export orders for apparel in China’s factories, cotton demand is expected to decline by 0.6-1 million tonne in 2019-20.
This was recently expressed in China’s cotton futures market. The most actively traded May cotton contract dipped below 10,000 yuan/mt on Zhengzhou Commodity Exchange on March 24, once to the lowest of 9,935 yuan/mt, which was close to the historical low of 9,890 yuan/mt and has declined by 4,515 yuan/mt from 14,450 yuan/mt appeared on January 14 before the Chinese Lunar New Year.
Chinese domestic cotton consumption, influenced by the export orders, is expected to fall by nearly 1 million tons soon. If the state reserves of cotton do not persist, the stock / consumption ratio is estimated at 55 per cent, up 7 per cent from the previous season. With the ongoing pandemic, global cotton consumption may also see a significant reduction.
Many apparel and materials manufacturers have announced new product lines commissioned to produce personal protective equipment (PPE) for consumers and medical personnel. French interlinings maker Chargeurs announced a new brand, Lainière Santé, which will produce a full line of PPE products. These products will be manufactured globally, including in the United States, and will be available on Amazon in weeks, according to the company.
The 148-year-old French company is manufacturing 10 million face masks per week and is also involved in the production of scrubs, advanced textiles, intelligent fabrics and protective gloves and bactericidal films. It has altered a “significant portion” of its textile production toward the manufacture of PPE and is the largest supplier of such products to the French government, according to the company.
Another global manufacturer of branded and private label garments, Delta Galil now plans to produce PPE products for the medical community. The company will produce more than 1.5 million masks for European governments and emergency personnel along with the Delta European Brands subsidiary Schiesser. Schiesser will produce more than 1 million of these masks for distribution among the Czech and Slovakian governments as well as a German PPE company.
Schiesser and Eminence, another subsidiary producing 400,000 masks a month for the French government, NGOs, local fire departments, police forces and hospital workers, recently reworked a selection of factories to produce these reusable, machine-washable face masks.
Top global brands/retailers have been flocking to Bangladesh for the quality of denim products at competitive prices. A new relatively new entrant in denim, Bangladesh expects strong demand for their denim to continue. However, COVID-19 could be a major growth interrupter going forward, writes Ajanta Ganguly
As the second-largest global exporter of textiles and apparel to the world after China, Bangladesh has benefitted greatly from the US-China trade conflict over the few years. However, due to shorter lead time and a better business environment, Vietnam, Pakistan and other countries are close competitor, with whom US retailers and investors feel safer. Vietnam has gained the most from the US-China trade war because of its preparedness in reviving business from the trade redirections. Buyers were initially not keen to come to Bangladesh, as the ease of doing business was still lower compared to other competing countries.
COVID-19 distresses the burgeoning denim export segment
Low wages have helped Bangladesh to build its garment industry which is people-centric with around 4,000 factories employing 4 million workers. The industry picked up quickly with deflected business from China, garment exports accounted for $34.12 billion or 84 per cent of the country's overall exports of $40.53 billion, in fiscal year ending in June 2019.
Denim exports from Bangladesh to the US rose 5.42 per cent to $573.27 million during the January-August period of 2019, due to the redirected business as a result of the US-China trade war. Although Bangladesh was supposed to gain more from trade conflicts in capturing market share of denim products, its close competitors of Vietnam and Pakistan gained the highest. The total imports of the US of denim products from world markets recorded a 4.55 per cent growth to $3.9 billion during the January-August period of 2019, which was $3.73 billion.
But just when finally it got some business going, the Coronavirus pandemic struck and everything started going downwards rapidly. The finished products are ready and waiting but the US and European countries reeling under the pandemic and in no position to bring them over. The country now looks all set to lose roughly $6 billion in export revenue this financial year amid cancellations from some of the world's largest brands and retailers. Along with this will be the loss of jobs many of the of more than two million Bangladeshi garment workers. This might just be the last nail in the coffin of a poor economy.
The Bangladesh government is now appealing to global markets in Europe and the US to pay and take delivery of the finished products once the lockdown is lifted, even if they don’t place any new orders. Order cancellations could affect more than 2 million workers in the garment segment, with some 1,048 factories that are part of the Bangladesh Garment Manufacturing Exporters Association (BGMEA), as being reported.
"We've lost more than $3 billion due to the crisis. All our orders until July have been cancelled or suspended. Suspended orders will eventually get cancelled. All these orders were placed for summer and it takes three months to get these delivered. If they are not taking supplies now they will not take it when the summer is over. Many factories will be closed if this persists,” points out Mohammad Hatem, vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
Although the country’s overall apparel export figures were high, most Bangladeshi factories were already facing losses or thin margins since last year because of government-implemented wage increases in December 2018. However, most buyers were cancelling orders that had been produced, delaying payments and asking for discounts on already shipped goods. Others were following a wait and watch policy and refraining from placing new orders. The number of firms cancelling orders is growing everyday leading to increased pressure on supply chain of the upstream firms.
Denim a new export item for Bangladesh with high global potential
Bangladesh is a new entrant in the global denim markets, valued at nearly $60 billion, with a share of only $3 billion in a year before the pandemic struck. But the prospect is high for Bangladesh as globally renowned retailers and brands are flocking to Bangladesh for the quality of denim products at competitive prices. Bangladeshi garment makers are expecting the total denim export will reach $7 billion by the end of 2021 for the different kinds of garments higher demand for the products. However, before, things were going well for the country.
Demand for denim products for both men and women are increasing worldwide. Experts say in Europe, one in every three persons wears denim from Bangladesh. Almost 70 percent of the population in the US wear denim products regularly, with an average consumer owning seven denim products at any given time. In the UK each consumer owns an average of 17 denim garments. Annually 2.1 billion pieces of denim are sold globally. The denim sector will grow by 15 per cent year-on-year until 2020. It is also predicted that the size of the global denim market will reach $64.1 billion by the end of 2021.
Around 40 per cent of denim fabrics used by leading global brands come from Bangladesh with the rest through import mainly from China, India, Turkey, and Pakistan. Local entrepreneurs spread throughout the country have set up more than 32 mills and invested more than $1billion in the country so far. In reaping the maximum benefit from the trade tension garment manufacturers have emphasized trade liberalization, attracting FDI product diversification and making exchange rate competitive.
Indeed, the reality will be different after the unforeseen pandemic. Many brands such as H&M, C&A, JC Penney, Best Seller, Tesco, Zara, Li & Fung, K-Mart Australia, K-Mart USA, Takko, G-Star, Inditex, Only & Sons, Only, Pull & Bear, Barmoda, Nosiy May, LPP and New Look are currently sourcing their denim requirements from Bangladesh. Many local manufacturers have now developed their sophisticated design studios or value addition to their products.
Other low-cost countries strong competitors
Most of China’s trade is shifting to Vietnam and Cambodia as US retailers and investors feel comfort due to shorter led time and better business enlivenment. Vietnam has gained the most from the US-China trade war because it was more ready to revive business from trade redirections. It earned around $346.27 million exporting denim products, up by 34.43 per cent from $256 million during January-August of 2018. Vietnam has gained the most from the trade conflict not only because they managed best to gain from the redirected trade, but also because they have a more diversified products basket. Much of the garment trade has been redirected to Mexico too, which was the second-largest exporter of denim goods in the Jan-Aug period of 2019 with an 8.80 per cent increase in export from $793.22 million to $863 million.
“Bangladesh’s denim products exports to the US markets performed better due to the US-China trade war. But Bangladesh has been able to capture a very few from the trade conflicts, while its competitors such as Vietnam and Cambodia reaped the most benefits. Buyers are not willing to come here as the ease of doing business is still lower comparing to other competing countries, which is undermining the opportunity. Though, Bangladesh saw an eight-point jump in ease of doing business in the latest ranking but not enough to attract them, ‘’ points out Sharif Zahir, a director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
China has been moving away from the basic garment manufacturing business for the last couple of years as it is now more focussed on high-end garment items. Lack of skilled workers, who now prefer better-paid jobs, as well as the high cost of production, is helping to guide the workflow towards Vietnam, Cambodia and to even33 Myanmar, a promising new entrant to the apparel trade.
Ziaur Rahman, H&M regional head for Bangladesh, Pakistan and Ethiopia believes Bangladesh has a large scope to increase its share in the clothing market through diversification of apparel items, producing value-added product development and increasing efficiency. Rahman says when placing any value-added denim products, H&M first thinks about Turkey, then China, then Pakistan due to their capacity and strength on value-added segments. Bangladesh is the last option for them. Apparel giant, H&M annually sources garments and accessories, worth around $3 billion, which is around 8-10 per cent of Bangladesh's total apparel export earnings.
According to market research firm Technavio, global denim and jeans market is worth more than $60 billion, out of which around $14 billion markets exist in the US alone. The denim industry is expected to grow at a CAGR of over 6.5 percent by 2020. As one of the largest exporter to the EU, while holding a large share in US markets, there is an enormous opportunity to grow in the US, surpassing Mexico and pacing up to match the export figures of China, especially in premium denim jeans segment which is expected to grow at a CAGR of 12.23 percent by 2020.
Denim export market adopts a wait and watch policy
In getting higher prices and to make an entry into more expensive premium products, Bangladesh needs to focus on more sophisticated technology-based manufacturing industries. This would include innovative technology in washing, dyeing, manufacturing and the rolling out of the finished goods. The government also needs to adhere to the denim manufacturers demanded policy support regarding a better gas and electricity connection at cheaper prices to increase fabric production capacity.
Many local businesses are now making new investments in fabrics and design innovations and increasing manufacturing capacity, to redirect China’s export market towards them. This will greatly help to promote Bangladesh’s dominance in the US and EU markets with a product portfolio of high-end products at a better price. Also, the improvement of the safety and hygiene standards in the garment manufacturing segment is attracting more global buyers.
Even before the Coronavirus pandemic struck, the retailing situation of denim was not good across the European Union. Consumption had fallen mainly due to uncertainty over the execution of Brexit. Having been delayed several times, it has been a wet blanket on importers' confidence and a big reason for lower export earnings from the denim segment in Bangladesh. Since importers were unsure about the tariff rate after the Brexit they have remained low-key about placing large work orders. Industry leaders were looking forward to a jumpstart to their export figures through the 12th edition of Bangladesh Denim Expo which was scheduled in April. But the health concerns and travel restrictions linked to the coronavirus outbreak has led to the event being cancelled.
Bangladesh and other low-cost manufacturing countries are now undergoing major commercial and humanitarian damage due to stoppage in production and delayed payments. The global fashion industry will need to rethink on how it will do sustainable business and purchasing and manufacturing policies will have to be changed in the light of the economic impact of Covid-19. Till then, everything will remain in gridlock with millions of jobs are at risk and cancelled or frozen orders, till the global denim industry slowly gets back to its feet again.
Unifi, a leading innovator in recycled and synthetic yarns, is supplying yarns and fibres to more than 100 companies that are producing the masks, gowns, and other personal protective equipment needed by first responders, medical personnel, and military. The company recognises the hard work that its customers are doing in supplying critical products.
Unifi’s fibre is an essential ingredient in the production of hundreds of critical components and products including masks, gowns, sewing thread for gowns, sterile wipes, drapes, and elastics for masks and face shields.
Unifi customer, Contempora Fabrics, based in Lumberton N.C., normally supplies fabric for baseball uniforms this time of year, but this season’s fabric is shifting to the production of medical masks and gowns. The factory using Contempora’s fabric is located in Pennsylvania and is owned by sports gear producer, Fanatics. The repurposed fabric is 100 per cent polyester sourced from Unifi’s operations in Yadkinville.
Hit hard by the COVID-19 pandemic,Vietnam fashion brands and fashion shops are turning to sell protective suits and other anti-pandemic products.
Local fashion brand Ivy Moda is offering protective suits for adults and children in white and blue color. The one-time-use products are sold at VNĐ80,000 (children) andVNĐ100,000 (adult) each. The fashion company also produces face masks.
Similarly, Format fashion company, which produces women clothes and accessories, also announced it will start selling face masks and purportedly protective headwear.
Each set of three masks printed with the national flag with the words 'Tự hào Việt Nam' (proud of Việt Nam) costs VND63,000 while the protective headwear costs VND45,000.
As one of the biggest garment firms in Việt Nam, Garment 10 Corporation Joint Stock Company ia offering white and light pink protective suits. Earlier, the firm also started manufacturing face masks.
The UK-based suppliers are facing tough times as retailers extend payment terms and cancel orders in these tough times. If the existing conditions persist for long, the suppliers warn the fashion industry of being wiped out.
Nigel Lugg, Chairman, UK Fashion and Textile Association, has revealed that majority of retailers are extending payment terms and there are widespread cancellations even of orders in progress.”
Suppliers facilitating New Look, a fashion chain with 400+ stores in UK, received a letter which informed them that they would not be paid for orders in production.
This is simply horrifying as the retailers and buyers are not even accepting orders that have been already completed, nor are they paying for those orders.
The fact that raw material is always purchased beforehand needs to be understood, as the retailers are deferring their orders owing to the present situation. It might destroy firms and factories throughout the supply chain in such a vulnerable scenario.
To the dismay, retailers cannot soak a sudden revenue plunge and the cost of their liabilities. And cancellation of orders has led to whole seasons such as Autumn/Winter, Spring/Summer ending up in piling up of stock inventories.
While textile mills and garment units in Tirupur have fallen silent, 100-odd apparel units are doing brisk business, thanks to an avalanche of orders national and overseas for face masks, personal protective equipment (PPE) and gloves. With orders for more than 10 lakh face masks and a lakh PPEs, the multi-million dollar apparel cluster is emerging as one of the major supplier of medical textiles in the country.
Orders started pouring in from state governments, corporate entities and private hospitals from the last week of March. Kerala government was among the first to place orders. From 10,000 masks, the orders soon touched a lakh and are galloping beyond 10 lakh.
On Friday, two consignments of masks and PPEs weighing more than two tonnes were sent to Kerala by train. A day back, a special flight was sent from Coimbatore to Mumbai carrying cartons of medical textiles.
The Tirupur apparel cluster has been going through a rough patch for the last three years, missing its annual turnover targets due to factors like demonetisation, GST and the global economic stagnation because of Covid-19. But the crisis has helped units here take baby steps towards technical textiles, a growing market.
Compared to the last fiscal year, the Joint Apparel Association Forum (JAAF) foresees an immediate contraction of $1.5 billion in Sri Lankan apparel exports during the 3-month period ending in June.
The forum also expects further demand contractions that could result in reduction of apparel exports by an additional 30 – 40% after June. The situation further compounded when the effects of the current closure with no clear date of resumption are factored in.
The impact of the curfew may result in trade shift due to countries like Vietnam, Cambodia, and Indonesia, Lanka’s main competitors, being completely operational.
While most companies have pledged to pay March salaries, a vast majority of the industry will struggle to pay salaries from the end of April onwards due to the factors outlined above that have led to the evisceration of the industry’s working capital.
The forthcoming European Union Generalised System of Preferences (GSP) scheme does no favor Bangladesh, points out EuroCommerce, the European body representing retail and wholesale sectors. It says the safeguard measures proposed in the forthcoming GSP would severely affect Bangladesh. Currently, Bangladesh benefits from the ‘Everything but Arms’ arrangement of GSP for least developed countries (LDC's). With a per-capita income of $2,457 in 2021, Bangladesh is classified a low-middle income country. With new GSP Regulation coming in to effect next year, Bangladesh could be given the ‘Most Favoured Nation’ tariffs and have the zero custom duty which it currently enjoys, removed.
GSP is aimed at helping products originating from a select list of developing countries preferential access to the EU markets. The preferential treatment is usually in the form of zero or reduced Custom Duties. The current GSP regulation ends on December 31, 2023 and the new one starts on January 1, 2024 valid for the next 10 years.
Bangladesh set to lose LDC status
Bangladesh is expected to exit the group of least developed countries (LDCs) in 2024, the most important change that it is going to face will be associated with preferential market access for exporters, particularly in the EU. The implication is huge, as 58 per cent of the country’s exports are to the EU and UK and Bangladesh's exports could face average duties of 8.7 per cent as its status upgrades from an LDC. What’s more for readymade garments, it could be 12 per cent.
The safeguard measures proposed in the European Union’s new GSP regulation would severely affect Bangladesh’s overall economy, points out EuroCommerce. The platform has already requested negotiations on the new GSP regulation and fears hundreds of thousands of RMG workers are at risk of losing their jobs. Additionally, the proposed measures could jeopardise the sustainable development of the sector. It is estimated shipments would drop by 5.7 per cent per year. To mitigate these effects, Bangladesh needs to qualify for the GSP+ scheme to preserve its competitiveness in the export market.
GSP+ scheme is a 'special incentive arrangement for Sustainable Development and Good Governance' for 'vulnerable developing countries'. This system grants full removal of tariffs on over 66 per cent of EU tariff lines. To qualify for the scheme, Bangladesh has to ratify 27 international conventions and has to fulfill the 'vulnerability' criteria as set by the European Union. In order to address these concerns, amendments of the existing labour laws, elimination of child labour, registration of trade unions, elimination of backlog in cases of labour laws etc, have been given the most emphasis.
The government of Bangladesh, along with relevant stakeholders, has been actively addressing issues related to the international conventions for some time now. An indicative action plan for addressing all the issues has already been developed and shared with the European Union. However, it has been put on hold due to the pandemic. A tripartite committee has already been formed with six representatives from the government, three representatives from entrepreneurs, and three representatives from workers.
Over 50 per cent export to the EU a roadblock
One of the biggest obstacles is that as soon as Bangladesh crosses 37 per cent threshold of exports to the EU, the new GSP Regulations will kick in. It is now time for a tripartite discussion between the EU law makers, the EuroCommerce personnel and Bangladesh government to find a middle path that does not destroy the well-invested, revenue and job generating textile and readymade garment sector of Bangladesh, the backbone of its export-based economy.
Wide-format inkjet printer and cutter manufacturer Mimaki USA, an operating entity of Mimaki Engineering in Japan, is expanding its existing 3D printer offering with the new large-scale Mimaki 3DGD-1800 system, which complements the company’s full-color UV-cure inkjet 3DUJ-553 3D printer and 3DFF-222 desktop system. Due to its size, the new 3DGD-1800 is a great choice for 3D printing dimensional displays for multiple applications.
Mimaki USA develops and builds a full line of digital printers and cutters, and provides a total workflow solution for applications in the industrial 3D printing, art, sign graphics, and textile and apparel markets. Its new 3DGD-1800 3D printer, which offers a processing speed that’s three times faster than what conventional FFF and other extrusion-based systems can provide, creates large-scale prints using Gel Dispensing Printing technology, which sounds similar to Massivit 3D’s proprietary GDP method that combines FDM and SLA techniques.
Mimaki’s newest 3D printer offering, weighing in at 2,500 kg, is able to create a figure that’s 70.8″ high in only seven hours, with a maximum build weight of 150 kg and dimensions of 57” x 43.7” x 70.8”. The 3DGD-1800 has an assembly-based design, which allows users to print massive objects that, as Mimaki USA puts it, far exceed the size of the formation area. Additionally, because the system does not need to use support materials for internal structures, it can print objects with hollow interiors at a higher rate of speed than conventional 3D printers.
