Focus on strategic investment projects to accelerate Lenzing’s revenue growth
Despite a generally difficult demand environment for textile fibers and a drastic drop in prices for standard viscose, the Lenzing Group recorded a solid business development in 2019. Its disciplined implementation of the sCore TEN corporate strategy and the accompanying focus on specialty fibers, helped the company to mitigate the effect of unprecedentedly low standard viscose prices.
Our focus on specialty fibers contributed to our resilience during the reporting period. Our goals for 2024 underpin this confidence in our future”, says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “The implementation of the key projects in Thailand and Brazil plays a central role in further strengthening our market position and in accomplishing our ambitious climate targets,” Doboczky adds. The expansion and modernisation of the dissolving wood pulp plants in Lenzing and Paskov, which started in 2017, will increase pulp production capacities by roughly 35,000 tonne annually. The expansion in Lenzing was successfully implemented in the second half of 2019. At roughly the same time, the new capacities at the Paskov plant were gradually started up. This process will be completed in the first quarter of 2020.
Based on the decision to build a dissolving wood pulp plant in Brazil with its partner Duratex, Lenzing will increase its self-supply by 500,000 tons annually, thus strongly enhancing backwards integration. The plant is expected to start operations in the first half of 2022. Lenzing and Duratex hold 51 percent and 49 percent, respectively, in the joint venture. Industrial CAPEX are expected to total roughly US$ 1.3 billion (based on current exchange rates and customary tax refunds). Expansion of specialty fiber capacities In 2019, Lenzing also started the construction of a state-of-the-art lyocell production facility in Thailand. The investment for the new plant with a capacity of 100,000 tonne amounts to roughly EUR 400 million. Construction work started in the second half of 2019. The completion is scheduled for the end of 2021.
The primary focus of the company in the coming years will be on the implementation and execution of set climate targets and investment projects in Thailand and Brazil. Lenzing aims to increase the share of high-quality specialty fibers in fiber revenue to 75 percent by 2024 and the share of internally produced pulp to more than 75 percent. In line with its strategic commitment for 2024, Lenzing strives to reduce CO2 emissions per ton of product by more than 40 percent compared with 2017.
The group also expects the comparatively positive development of its specialty fiber business to continue. Driven by the challenging situation in standard viscose and low paper pulp prices, prices for dissolving wood pulp are expected to remain at low levels. Caustic soda prices in Asia have already declined significantly over the past months; this development is now also noticeable in Europe. The above effects significantly impact earnings visibility for 2020. The Lenzing Group currently expects the result for 2020 to be below the level of 2019. The market developments reassure the Lenzing Group in its chosen corporate strategy sCore TEN. Lenzing will continue to focus on the strategic investment projects which will yield a significant contribution to earnings starting from 2022.
Complete overhaul of business model to help industry become more sustainable
"Owning to its faulty approach, the fashion industry’s sustainability efforts have remained largely insufficient. Instead of completely overhauling its business model, so far the industry has only been focusing on recycled materials, waste and rented clothing. The latest ‘Pulse of the Fashion Industry’ report by Global Fashion Agenda states only 60 per cent companies are making visible efforts towards sustainability. However, they need to scale deeper in order to be completely sustainable."
Owning to its faulty approach, the fashion industry’s sustainability efforts have remained largely insufficient. Instead of completely overhauling its business model, so far the industry has only been focusing on recycled materials, waste and rented clothing. The latest ‘Pulse of the Fashion Industry’ report by Global Fashion Agenda states only 60 per cent companies are making visible efforts towards sustainability. However, they need to scale deeper in order to be completely sustainable. At its present rate of development, the industry will be able to meet neither the Paris Agreement nor the Sustainable Development goals.
To achieve this, companies need to set competition aside to partner with opponents for the sake of the industry at large. They also need to look at new materials that they have not yet explored.
Lack of accountability, insufficient infrastructure
One big reason for the industry’s failure to achieve its sustainability goals includes lack of accountability by
supply chains. Neither end of the supply chain has taken the reins in driving sustainable change. Though some companies have adopted circularity as a cure for all their sustainability woes, they have been unable to address the issue sufficiently. Even designers are being trained to create products in such a way that they can be recycled. However, lack of sufficient infrastructures prevents the industry from achieving its goals.
Increasing collaborations, rewards to help achieve sustainability goals As Amina Razvi, Executive Director of Sustainable Apparel Coalition points out, to tackle this problem, brands will need to reconcile sustainability with some of the more important economic metrics driving the fashion industry—like growing demands that have brands stocking up on endless inventory.
Supply chain improvements, rewards to increase sustainability
To provide a solution to this problem, Global Fashion Agenda has assembled a think tank with key stakeholders, including McKinsey & Company that focuses on improvements to supply chain efficiencies. However, this alone will not solve the problem. The industry also needs to reward companies that are truly sustainable. They also need to outline the key leverage points for making the sector more sustainable by collaborating with other industries.
The industry can’t solve its problems with the thoughts that created it. It needs to start talking to economists, different industries to come up with the key leverage points to focus on.
European Commission releases report on environmental impact of fashion
The European Commission has released a new report that guides industry leaders on lessening the environmental impact of apparel production. The methodology covered in the report includes both the myriad processes required to bring a T-shirt to market including material production, spinning, printing, finishing, packaging, transportation, electricity generation, along with the standard use cycles employed by consumers such as washing, drying, ironing.
The study is part of a wider series of environmental-footprint pilots, known as Product Environmental Footprint Category Rules (PEFCR), designed to communicate the life-cycle environmental performance of popular products to business partners, consumers and other stakeholders using detailed and comprehensive technical guidance.
This specific PEFCR defined T-shirt as any apparel product, fit to dress the upper body that mainly consists of a tubular- or circular-knit fabric without a full-length opening. Items in the study included athletic T-shirts, singlets and other vests, polo shirts and T-shirts with short, long or no sleeves for men, women, children and babies.
Stakeholders consulted for the project included the Belgian Federal Public Service for Health & Environment, the Business Environmental Performance Initiative, the Cotton Research & Development Corporation, the Ministry for the Environment, Land and Sea of the Republic of Italy, Euratex, the European arm of the Sustainable Apparel Coalition, Hugo Boss, Nike, Inditex and Lenzing.
Coronavirus compels Texfusion to cancel March show
The outbreak of Coronavirus has compelled Texfusion to cancel its upcoming event in March 2020. The show was scheduled to take place from March 25-26, 2020 at the Business Design Centre in Islington alongside the London Print Design Fair. Set to welcome about 150 international fabric manufacturers, this would have been the show’s 11th edition. Its 10th edition, held in November, featured a dedicated China Pavilion with more than 60 fabric and garment manufacturers, while a Taiwan Pavilion showcased ten companies in partnership with the Taiwan Textile Federation.
However, a new event called Texpremium is set to take place on 23-24 June. Dedicated to high-end European textiles, this will be the first premium fair in Textile Event’s portfolio.
The London Textile Fair, which showcases exhibitors from all over Europe, is also set to go ahead on 14-15 July, and Texfusion will return for another season on 21-22 October.
Supima surpasses 500 global licensees
In 2019, Supima hit milestones surpassing 500 global licensees and over 200 brands using the Supima trademark as a consumer-facing ingredient brand. Supima enters 2020 poised for further advancements in both market penetration and initiatives in verification and authentication. Supima has fostered deeper connections with its partner brands and manufacturers through education and promotional activities. Since 2016, Supima has had a 44 per cent increase in licensees.
Sustainability continues to be a major factor in fibers, fabrics and finished products and Supima is working to address the issue. The cotton origin verification platform with Oritain has been one of Supima’s main accomplishments.
Competing standards and organizations are not the best way to proceed. This does not work. Without knowing the origin and without knowing the environment that the cotton is produced in it is impractical to make any claims about the product. Hence, there is no easy solution and those brands/retailers that want to get their message right are going to have to work together with the supply chain and their constituent partners to be authentic about the product that they are putting on their shelves. With the impacts of a trade war with China, and the extenuating complications to global trade with the coronavirus, there has been a direct and significant effect on the demand and utilization of cotton in general.
Global synthetic fiber market grows four per cent
The synthetic fiber market is growing at four per cent. The business landscape features fragmentation now. A handful of vendors dominate the market, while the remaining shares are distributed among several vendors. This is expected to lower the entry barriers for new vendors. The market is also witnessing a high participation of regional players, who are generating substantial market revenues. Leading vendors in synthetic fibers are involved in the research and development of innovative products. Customisation is a leading strategy that is being adopted by vendors to gain momentum in the global specialty fiber market. Collaboration and geographical expansion of production facilities is another key strategy being adopted by market players.
The market is expected to be dominated by Asia Pacific excluding Japan. This could be attributed to the soaring population in the region. Automotives are expected to boost the market’s growth. Expanding demand for automotive interior materials like tweed, velvet and velour is expected to drive the market’s development. Polyester is the most generally used material in automotives because of its light weight property. Developing demand for lighter automotive interior material is expected to drive the market till 2026.
Leading vendors operating in the global specialty synthetic fiber market are Mitsubishi, Toray, Asahi Kasei Fibers and Indorama.
Sri Lanka apparel earnings up five per cent in 2019
Sri Lanka’s earnings from apparel exports grew 5.1 per cent in 2019. Exports to the European Union grew over five per cent. Exports to the United States grew 3.3 per cent. Exports to other markets such as Canada, the United Arab Emirates, Australia and Japan also grew at a comparatively faster pace.
The country’s apparel sector expects immediate revenue loss due to the Coronavirus outbreak in China to be about a month’s value of apparel exports. With the industry expected to struggle due to the supply chain derailment, from the month of March till June, the hit is expected to be about 30 per cent of the cumulative export values for the four months. The industry has estimated the loss based on the assumption there will be no cancellations in orders from buyers and in that scenario the industry would be faced with a tough time with manufacturing the standard orders and the additional loss, which put together would be a burden. Meanwhile, fabric supplies are expected to arrive from China by end-March and the challenge for the industry would be to have the production completed and delivered within the standard cycle of 1.5 months. Overall costs are expected to increase, specially on the logistics side, due to the cancellations of routes from China to Sri Lanka.
Kering plans hand embroidery workshop in India
French luxury group Kering plans to establish a hand embroidery workshop in India. The aim is to improve traceability and working conditions in its supply chain. The goal is not to cover all of Kering’s hand embroidery works but to get a direct and concrete knowledge of hand embroidery and thus also be able to better collaborate with external suppliers as regards working conditions, wages, prices and contractual commitments.
Kering is the owner of brands like Gucci, Saint Laurent and Balenciaga. Kering has reached 88 per cent of traceability for key raw materials and aims to increase the share to 100 per cent by 2025. The group has also lowered its environmental impact by 14 per cent between 2015 and 2018. Kering has linked up with the Institut Français de la Mode (IFM) to launch the first higher education research and teaching center dedicated to sustainability and corporate social responsibility in the fashion industry. The center will focus on a wide range of topics related to sustainability, from traceability to measurement, as well as eco-responsible business models. Aspects of creative ecology will also be studied in order to identify ways in which creative teams can develop ecological fashion and propose new sustainable creative offerings while developing tools for measuring and appropriating environmental and social issues.
Italy luxury sector comes to a halt due to Coronavirus
Italy’s luxury sector has been dealt a hammer blow by the Coronavirus outbreak in China. In a country that is home to more than a third of global luxury shoppers, brands have been forced to shut shops, shelve new openings and postpone advertising spending. That is set to translate into major sales hit for the country’s fashion and textile industry. It also has implications for the luxury industry worldwide due to Italy’s importance as a supplier. The sector’s sales are expected to decline three per cent at current exchange rates. The industry which expected a slowdown in the first quarter now feels the whole year will go up in smoke.
Prolonged disruption of economic activity may result in supply chain issues for most brands. Italy is a major manufacturing hub and home to scores of specialist manufacturers of high-end goods from shoes and leather goods to men’s wear. Foreign buyers of Italian textiles have started cancelling orders. Global luxury brands including Gucci and Louis Vuitton are scaling back orders with Italian suppliers. Even before the unprecedented restrictions were put in place in March, brands had been cutting orders from late January. A company that was producing handbags for Gucci has no orders for April or May and has been brought to a standstill.
US denim imports decline by 13.29%
As per OTEXA, the imports of jeans by the US declined by 13.29 percent in value to $265.99 million in January compared to $306.78 million in the same month in 2019. For the 12 months through January, its imports of denim apparels declined by 4.43 per cent to $3.69 billion.
The country’s imports from Mexico dropped by 32.28 percent in January to $41.47 million in value while that from China plummeted by 60.17 per cent to $33.94 million. For the year through January, imports from Mexico decreased by 5 per cent to $782.78 million, while China’s shipments declined by 31.05 per cent to $644.66 million.
However, imports from Bangladesh increased by 5.18 per cent to $51.87 million in January. For the 12-month period, these imports increased by 6.96 per cent to $601.86 million and shipments from Vietnam rose by 27.61 per cent to $384.51 million.
Other major suppliers of jeans to the country during the month included Egypt, whose exports increased by 25.33 percent to $15.16 million; Cambodia whose exports increased by 91.37 per cent to $16.1 million, and Sri Lanka who exported 18.22 per cent more jeans to the US.
More...
Euratex recommends success elements for new EU industrial plan
The European Apparel and Textile Organization (Euratex) has recommended three essential elements for the success of the new EU industrial plan. The first element includes assessment of the proposed measure in a global context. European companies cannot be subject to new rules, standards or regulations unless all players do play with the same rules.
Secondly, Euratex claims innovation into a more sustainable industry has an important cost the end consumer is not always willing to pick up. This may jeopardise the financial sustainability of the industry, especially for smaller companies. Therefore, adequate measures should be taken to alleviate the burden of green investments, especially for SMEs.
Finally, Euratex quotes labour force shortage as an important barrier to the development of the industry. In 2018, 34 per cent of the textile and clothing workforce was over 50 years old. It is therefore urgent to make an effort to both upskill and reskill the current workforce and to attract young talent.
Ethiopia emerges as promising apparel manufacturing hub
With Southeast Asia and Turkey on the brink of saturation, Ethiopia is now positioned as one of the most promising hubs for apparel sourcing. Low salaries, foreign investment led by China and commitment to infrastructure are the country’s biggest incentives for operators in the sector. The first textile factories in Ethiopia were launched in 1939. The sector is growing at an annual average of more than 50 per cent and hosting around 65 international investment projects. The factories produce wool, cotton and nylon fabrics, acrylic and cotton threads, sewing thread and readymade garments, among others. The country plans to be the main textile supply hub in Africa, following in the footsteps of other countries such as Vietnam and Bangladesh. In 2016, foreign sales of the sector were 56 per cent more than the previous year’s. In 2019, the country’s exports of fashion goods to Europe were 49 per cent higher than the previous year’s.
H&M opted for Ethiopia as a textile hub in 2014. The Swedish fashion distribution group chose to set up joint ventures with local manufacturers to train workers and prepare factory executives. Currently, the Swedish retailer has 31 suppliers in Ethiopia. Inditex, Decathlon and Primark are some of the other major operators in the sector that have opted for the African country.
BGMEA denies US senator report of violations of labor rights and safety
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has refuted a report by US Senator Robert Menendez on alleging Bangladesh apparel factories of labor rights and safety violations. Submitted recently, the report titled ‘Seven Years after Rana Plaza, Significant Challenges Remain,’ expressed concerns about the welfare of workers in the garment industry.
The report says, over 1,100 Bangladeshis were killed and thousands injured when Rana Plaza caved in on April 23, 2013 in the nation's deadliest industrial incident. BGMEA has demanded further clarification on this as the sample size of the interview-based report seems over-generalised The association has called for more substantiated details about physical abuse and mistreatment of a worker named Shopna interviewed in the report.
The association also refuted allegation of harassment and low wage payment. It stated that the workers of Youngone are paid above the nationally set minimum wage of Tk 8,000.The Accord on Fire and Building Safety in Bangladesh receives regular phone calls from workers about occupational health and safety. It received 36 calls in 2019 and 2020.
On the complaint of termination of workers by 104 garment factories in December 2018, the association revealed that a committee was formed in May last year to assess the appropriateness of the number of terminated labourers and filed cases and to find justified solutions. Bangladesh amended the labour laws and increased the minimum wage for garment workers in 2018.
China to ship raw materials to Cambodia
Hun Sen Cambodian Prime Minister Samdech Techo Hun Sen says China has arranged vessels to freight raw materials for garment and footwear production to Cambodia from now until May. Due to a shortage of raw materials from China caused by Covid-19, some factories in Cambodia had partially suspended operations, affecting almost 20,000 workers. The fast delivery of raw materials to Cambodia came after a delegation of the Chinese Ministry of Commerce visited Cambodia recently and met with Cambodian Minister of Industry and Handicraft Cham Prasidh.
He said during the meeting, Prasidh presented a list of necessary raw materials that Cambodia is facing a shortage for the garment and footwear industry. He added that the minister also initiated a "Green Lane" to facilitate and speed up shipments, logistics, and customs processing clearance, so the raw materials could be reached Cambodia faster.
