Textile Firms Squeezed by Costs

Jul 27th, 2010

Textile Firms Squeezed by Costs


Posted TUESDAY JULY 27, 2010

From WWD ISSUE 07/27/2010

Shopping the Texworld show

Shopping the Texworld show.

Photo By Kyle Ericksen

NEW YORK — Pinched by higher raw material costs and pressured by buyers for faster turnarounds and lower prices, textile suppliers exhibiting at international textile shows here said they face daunting challenges.

There is a sense the worst of the economic crisis is over, but fabric firms showing at Première Vision Preview and Texworld USA this month said the biggest issue they face is an inability to pass on price increases to their customers, particularly retailers and brands opposed to raising prices in a weak consumer market. Retail prices for apparel have been on a decades-long decline and consumers are likely to resist increases, executives said.

Cotton, wool and synthetic fiber prices have been rising. At the end of June, cotton was 76 cents a pound compared with 50 cents a year earlier. Wool prices climbed to $3.65 a pound in June from $2.82 a pound last year.

Despite rising raw material costs, “everyone is here wanting lower prices,” said James Lee, sales director for South Korean textile firm PangRim Co. Ltd., and an exhibitor at Texworld USA at the Jacob K. Javits Convention Center. “I don’t see garment prices going up [in the U.S.].”

Carole Simon, an account executive with Taiwan-based Excelassoc Co. Ltd., also at Texworld, said, “The retailer wants the same price or lower. It’s difficult to manage and it’s worse now than last year in terms of raw material costs.”

Michael Maqsood, director of Experience Clothing Co. Ltd. and Fazil & Co. Ltd., said rising costs in China, in particular, where raw material prices are compounded by a labor shortage and higher wages, provided opportunities for his three factories in Bangladesh. However, the challenges remain.

“Retailers are much tougher dealing with their customers,” Maqsood said.

Merchants have pushed back on their suppliers, looking for discounts, more penalties if there’s an error in goods, “any excuse to get lower prices,” he said.

Exhibitors at Première Vision at the Metropolitan Pavilion & Altman Building expressed a similar sentiment.

“The retailer won’t increase prices and it comes back to the producer,” said Fatma Atay, export manager for Turkey-based Altinyildiz Corp., which manufactures tailored wools. “I don’t know how we are supposed to deal with that.”

Francesco Picchi, an owner of Italian woolen firm Picchi SpA, said, “I’ve been in the business 20 years and I’ve never seen the price of wool as high as it is today.”

During the recession, the number of sheep in Australia declined as farmers chose to use their land for more lucrative crops, and washing and cleaning mills closed because demand was down, he said.

As global economic forces continue to have an impact on the supply chain, many see an opportunity for new production centers to gain market share. At Texworld, officials from the U.S. Trade Representative’s office and the State Department highlighted efforts to strengthen industry ties with Pakistan. The show introduced a pavilion sponsored by the Trade Development Authority of Pakistan featuring Pakistani textile and apparel companies.

“The U.S. government wants everyone to know we’re doing everything we can to facilitate business in Pakistan,” said Gail Strickler, assistant USTR for textiles.

Pakistan, the second-largest U.S. textile supplier behind China, has been the focus of efforts to expand trade. Pakistan shipped 906 million square meter equivalents of textiles to the U.S. between January and May worth $633 million, according to the Commerce Department’s Office of Textiles & Apparel. As the ninth largest U.S. apparel supplier, Pakistan shipped 259 million SME between January and May, with an estimated value of $528 million.

Congress failed to move a bill last year authorizing “reconstruction opportunity zones” in Pakistan and Afghanistan that would provide duty free treatment to a limited amount of textile and apparel products and other consumer goods made in the zones. A renewed focus by the Obama administration on funding for the war in Afghanistan this year could give momentum to Congressional consideration of the manufacturing zones, which President Obama supports.

Pakistan and Afghanistan signed a trade agreement on July 18 to ease ground shipments of goods between the two countries. Secretary of State Hillary Rodham Clinton, during a two-day trip to Pakistan, unveiled details of a new aid package focused on water and energy projects.

Sumaira Moiz Farooq, director of Looptex Apparel Manufacturing Sourcing and Design, based in Lahore, said the Pakistan pavilion had helped her company establish itself at the Texworld show. The company, a first-time exhibitor, has worked with Levi Strauss & Co. and other U.S. firms, and wants to expand more in the U.S. Looptex exhibited as part of the International Apparel Sourcing Show at Texworld.

Suppliers offering fabrics with something different did brisk business at both shows. At Première Vision, Savyon Industries Textiles Ltd., a Brazilian company that manufactures jacquard knits and jerseys, ran through two books of order forms before midafternoon on the first day, said Laurent Prout, the company’s representative.

Joao Teixeira Duarte, commercial director for Portugal-based Gierlings Velpor SA, which makes fake fur and velvet, said differentiating by investing in product development and marketing in the recession paid off for his company. The firm saw a significant number of buyers during the first day of Première Vision.

Designer Kathryn Dianos said she “didn’t see much revolutionary in the majority of collections” at Première Vision, but overall it remains an important part of how she puts her color and trend concepts together when she thinks about her fall collection.

Overall, the shows seem to reflect the mood of the market, with some companies and sectors rebounding from recession faster than others. Most were in step with Jacques Brunel, deputy director general of Première Vision, who said the market has seen significant changes in recent years, even before the economic crisis.

“Where we had five or 10 people visiting from each company before, now there are one or two,” Brunel said.

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