China’s dominance is being challenged as buyers explore other markets and source fabrics closer to home
The shifting global sourcing landscape is seeing China’s dominance being challenged
Garment manufacturing may have been steadily shifting away from China to other low-cost labour bases in recent years, but the country remains the biggest sourcing market for fabrics.
The latest available figures from textile and clothing-promotion body Euratex show that China was the top textile export partner for European countries: volumes grew 13% for the first nine months of 2015, up from a total of €7.7bn (£5.9bn) in 2014. The country was followed by Turkey, Pakistan, India and the US.
Although no breakdown for the UK is available, sourcing experts suggest China remains the most competitive place to buy fabrics in bulk.
“It’s not as easy to relocate production of textiles to other areas and to chase lower prices, as it is for finished goods,” explains Peter Rinnebach, senior manager at consultancy Kurt Salmon and editor of its biannual Global Sourcing reference market survey.
Although China has a 32% share of garment production from the top 10 markets supplying Europe, this is down from a 2010 peak of 40% as a result of competition from Vietnam, Bangladesh, Turkey and Burma.
Average Chinese wages in the industry have risen by between 15% and 20% in the past two years, says Rinnebach, so production costs are now comparable with those in eastern Europe and Turkey, and higher than Morocco. Greater distance and longer delivery times make China less competitive than in the past.
Despite this, the key fabric sourcing locations remain the same, as “there are certain things you can only get in places like India, Italy or Turkey”, says Rinnebach: “Sourcing managers often have longstanding relationships with suppliers for specific types of fabrics and, because textile production is largely automated, it is less affected by rising wages. As such, we hear from clients that there are no significant shifts in fabric sourcing.”
Key sourcing statistics
Jason Marchant, managing director of clothing supplier May Trading, which became part of global supply group Li & Fung in 2014, agrees: “For high street fabrics, China is still the best for us. The country is very strong for fabric and, even though it’s got more expensive for garment manufacturing, because fabric production is all automated we buy 85% to 90% of our woven and yarn-dyed fabrics from there.”
Marchant says he mainly buys chinos and twills from Pakistan, India, China or Bangladesh, while cotton nylons tend to come from Vietnam and South Korea. He also buys some wool fabrics from Italy for the higher end of the outerwear market.
Raw material prices have mainly fallen in the last year. At the start of 2015 cotton prices hit a fi ve-year low of almost $0.64/pound, compared with a peak of $1.64/pound in 2011, reports euratex. Synthetic fibre prices fell by around 18% globally in 2015.
In reality, it takes a while for price falls in raw materials to filter down into fabric prices, says Marchant: “Prices for synthetics like polyester should be coming down because of the fall in oil prices but they seem to drop more slowly than they go up.”
Mark Dodds, a fabric technologist, sourcing and production consultant who works with cycling brand Lumo Clothing and whose previous clients include Asos.com, Next and Oliver Spencer, agrees: “It’s not like prices are suddenly a lot cheaper because of the drop in oil prices.” furthermore, exchange rates are enabling European fabrics to compete with Asian fabrics: “a typical [european] fabric might be about $0.50 per metre more expensive [than one from China] compared with around $2 five years ago. So you’re finding that high street retailers, unless they’re buying huge volumes, are looking closer to home and buying smaller minimums with repeats.
“We’re also seeing a revival in the amount of sourcing in the UK and there are a lot of good jerseys coming out of the east Midlands. You find that most do a mixture of producing in the UK and importing fabrics to offer as stock service, which is slightly cheaper but tends to work pretty well.” He also points to Portugal as a sourcing destination that is growing in importance thanks to its vertical integration, quality levels and small minimum-order requirements for jersey, cotton wovens, cotton nylons and polycottons.
“Turkey is starting to feel it a bit because there are usually higher minimum orders, but it is still very good for cotton shirtings and cotton blends, while Italy doesn’t seem as expensive as it was for quality wools and wool blends for outerwear,” he adds.
The pressure on margins is also causing sourcing managers to explore more fl exible production bases closer to home, says Rinnebach: “For apparel production, we’re starting to see a polarisation in the market whereby sourcing managers are looking to cheaper sourcing destinations of Pakistan, Bangladesh and Cambodia, or locations where there can be faster turnarounds and more flexibility, such as Eastern Europe and Turkey. This could be something that starts to happen in textiles, but it’s not something we’re seeing on a large scale yet.”
Drapers analyses the key factors in pricing and supply of the main fabric types for the coming year:
What happened in 2015? Despite India surpassing China as the world’s largest cotton producer, global production of cotton fell in 2015, mainly as a result of declining output in the US, China, India, Pakistan and Turkmenistan, Cotton Council International (CCI) reports.
Prices have been depressed since the summer of 2014 and market revenue has declined significantly over the past few years, at a time when production costs remain at elevated levels. CCI says the differential between costs and market revenue is the largest it has been in the past 10 years. As a result, US producers only planted 8.6 million acres of cotton in 2015, a decrease of 22% from the previous spring, and the lowest level since 1983.
Throughout the growing season, US cotton growers faced difficult weather conditions, from water restrictions in California to excessive moisture during planting, followed by drought in the Southern Plains across the southern states of the US, as well as excessive flooding in the Carolinas. CCI expects prolonged production declines of this scale to cause severe strain on the entire US cotton infrastructure.
Expectations for 2016 Prices have remained relatively stable throughout 2015, in the $0.60 to $0.63/pound range, and are likely to trade in the same range in 2016. US growers will make 2016 planting decisions based on relative prices of competing crops, such as grains and oilseeds.
China is expected to further reduce its cotton acreage in 2016 and to continue to import less cotton. Recent reports from CCI indicate that China might attempt to reduce its massive cotton stockpile this year.
What happened in 2015? UK-based luxury fibre supplier and textile group SIL Holdings reports that prices for mohair, cashmere, alpaca, silk, angora, camel hair, yak and vicuña fell from January 2015 to January 2016, as a result of weaker demand in Europe and the slowdown in China.
Sourced from rare camelids living in Peru and Argentina, vicuña fibre is the most expensive, but is only sold in very small quantities, whereas cashmere is typically the most expensive fibre sold in bulk. Fibre prices fluctuate according to fashion demand with rises and falls that are significant and rapid, says SIL Holdings group managing director Andrew Seal.
Expectations for 2016 Seal expects prices for luxury fibres to remain stable in 2016, although they could decline further as macro-economic factors continue to have an impact.
What happened in 2015? Statistics from Euratex and synthetic-fibre consultancy PCI Fibres show that the price of synthetic fibres – acrylic, nylon, polyester and polypropylene – fell by 18% in the last year, as crude oil prices dropped around the world.
Expectations for 2016 Polyester fibre prices will remain stable or have very marginal reductions after several months of continuous heavy falls, predicts PCI Fibres. Opinion is split on whether prices have entered a period of stability or will fall again, based on the outlook for oil prices.
What happened in 2015? In Australia, the largest producer of wool, prices rose by almost 20% from December 2014 to December 2015, as shown by the AWEX Eastern Market Indicator, the most common index used to measure raw wool prices.
Australian Wool Industries Secretariat consultant Peter Morgan says demand for medium and coarser wools has risen in comparison with finer merino wools, as the Italian textile industry, which typically buys more of the premium fibre, is under increasing pressure from Chinese rivals.
Expectations for 2016 While Australian wool production is expected to fall by 7%, the outlook remains steady for prices in 2016, although global economic uncertainty always has an impact.