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Drapers Textiles Report: What is driving textiles pricing?

As customers demand greater transparency in sourcing and textile prices fluctuate, retailers are looking harder at where to source their raw materials.

Fashion supply chains are under greater scrutiny than ever and brands are finding themselves obliged to respond. This year etailer Asos has pledged to map the key commodities – textile fibres, natural and synthetic materials – used in its supply chain by 2020, while Primark has started making it compulsory for suppliers to disclose where their cotton and wool come from.

There is a long way to go, but operators such as quality basics etailer Everlane in the US are leading the charge. Everlane discloses the costs involved in its products. For example, for a sweater priced at $88 (£70.40), it says raw material prices – at $14.55 (£11.64) – are less than half the “true cost” of the garment of $37 (£29.60). Last summer, the company flagged a 16% fall in raw cashmere prices and reduced the price of its cashmere sweater by $25 to $100 (by £20 to £80).

“The cost of raw cashmere fluctuates wildly,” said founder and chief executive Michael Preysman. “Sometimes it goes up. And when it does, retailers raise their prices. Sometimes it goes down. But when that happens, retailers almost never lower their prices.”

There is a lot more than just the cost of raw materials that goes into garment pricing. In the UK at the moment, the cost of retail is rising rapidly as a result of various factors from business rates and currency fluctuations to the new apprenticeship levy and the cost of providing an omnichannel offer.

Price rises

Nonetheless, prices of raw materials such as cotton and wool have risen over the past year. Many cotton indexes traded higher at the start of this year than last, despite data from the International Cotton Advisory Committee that suggests global cotton production will increase by 2% this year to 23.4 million tons. India is now the largest cotton-producing country, having overtaken the previous leader, China, in 2015. India’s production area is set to increase 7% to 11.2 million hectares as domestic prices remain steady and farmers switch from growing other, less attractively priced, crops. China remains the second-largest cotton-producing country, followed by the US and Pakistan.

World cotton mill use is expected to remain stable for the moment, as relatively high cotton prices discourage growth in demand. The top-consuming countries are China, India and Pakistan, followed by Turkey, Bangladesh and Vietnam.

It is worth noting that while cotton trading index Cotlook A Index shows prices around 20% higher than a year ago at 82¢/lb (66p/lb, see table, below), figures are nowhere near the cotton crisis of 2011, when prices reached a 150-year high of $2.44/lb, and retailers including H&M, Marks & Spencer and Superdry all warned margins could be hit.

Some, such as US trade organisation Cotton Inc, believe cotton prices could drop slightly as a result of the increase in exportable supply, but prices have proven to be resilient over the past few months.

Ethical concerns

The implementation in the UK of the Modern Slavery Act 2015 and a general movement towards greater transparency and ethical supply chains has led some retailers to look more closely at where and how cotton, in particular, is produced, to ensure no forced labour is involved.

Uzbekistan is the fifth-largest exporter of cotton worldwide, but The Cotton Campaign, Responsible Sourcing Network and other watchdogs have long claimed that its government uses forced child and adult labour on an industry-wide scale.

Many retailers and brands, including Inditex, Uniqlo, Primark, Peacocks, Levi’s, H&M and Burberry have signed the Cotton Pledge, committing to not knowingly source Uzbek cotton for the manufacturing of any products until the government of Uzbekistan ends forced labour in the cotton sector.

Awareness of environmentally friendly cottonfarming is growing, but it remains a niche market. The Better Cotton Initiative (BCI) was founded in 2005 by companies and charities including Adidas, Gap, H&M and Oxfam, and its members now include Marks & Spencer, Nike, Bestseller and Thomas Pink. The latest available data – from 2014 – shows BCI-licensed farmers produced 2.6 million tons of Better Cotton lint, which equates to almost 12% of global cotton production. It is an area that is growing, and many denim producers in particular, such as Brazil’s Vicunha Têxtil and Turkey’s Bossa Denim, are committing to increasing their use of BCI cotton.

Wool prices have also risen in the last year, particularly in Australia, which is seen as encouraging, as farmers had been switching to more lucrative crop cultivation than sheep farming in previous years.Peter Ackroyd, global strategic adviser for the Woolmark Company, president of the International Wool Textile Organisation (IWTO) and executive director for the Campaign for Wool, said demand for wool is growing for more personalised, quirky tailored looks and in premium athleisure garments, where its natural properties are fully emphasised.

But while industry experts suggest there is no reason for concern at the moment, rising fibre prices could be another challenge for retailers to tackle in the face of increasingly fluctuating exchange rates.

 

2017 textile prices

2017 textile prices

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