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Industry News (Aug 2010)
Issue date:01/08/2010
ATA Journal for Asia on Textile & Apparel - Aug 2010 Issue
Source:Journal for Asia on Textile & Apparel
East Asia

China

Textile industry performs stably in Q2

The Chinese textile and apparel industry was believed to maintain its momentum considering the steadily rising domestic prosperity indices.

The China Textile Industry Index (growth in 2003=100 points) recorded 99.4 points in the second quarter (Q2) of 2010, advancing 0.9 point from the previous quarter. The indicator is composed jointly by a research center under Economic Daily of China and the China Economic Monitoring & Analysis Center at the National Bureau of Statistics.

China’s Apparel Industry Index reached 99.2 points (growth in 2005=100 points) in the Q2, or 0.3 point more from the previous quarter. Meanwhile, the China Chemical Fiber Industry Index stood at 100.3 points (growth in 2005=100 points), rising 0.7 point from the previous quarter and expanding for the fourth consecutive quarters.

The performance of enterprises was also positive according to the indices measuring the operations the textile and apparel manufacturing enterprises.

Technical textile gross industry value soars 30%

Official statistics of China showed that the Chinese technical textile gross industry value jumped 30.6% to RMB 44.73 billion in the first five months of 2010. These technical textiles include ropes, cords and cables, technical textile tapes and tire cords, as well as nonwovens.

Sales reached RMB 43.41 billion, up 29%, in the period under review. The profit of technical textile tapes and tire cords rose 116.3% to RMB 670 million. Meanwhile, the profit of nonwovens expanded 46.3% to RMB 1.13 billion and that of ropes, cords and cables grew 36.3% to RMB 300 million in the first five months of 2010.

The Chinese customs office figures recorded an export of 341,000 tons of technical textile products such as nonwoven and specialty yarns at a value of US$990 million. The country also imported 78,000 tons of technical textiles worth US$430 million. Industrial textile import rose fast to US$2.1 billion, while the export valued US$730 million.

Major producing areas of technical textiles in China include Zhejiang, Guangdong, Jiangsu, Shandong and Fujian, accounting for 74.6% of the national gross production of technical textiles.

Chemical fibre production rises this first half

The total industry output of chemical fibres in China reached RMB 187.625 billion in the first five months of 2010, representing a 37.79% increase from the same period of the previous year, according to the latest figures of China’s National Bureau of Statistics (NBS). Profit margin of these enterprises rose 2.4 percentage points to 4.42%.

More figures are released by the NBS and the Chinese customs office on the Chinese chemical fibre sector (Jan-Jun, 2010, unless otherwise stated):

• Import: 365,900 tons, up 10.87% (Jan-May, 2010)

• Export: 792,000 tons, up 50.21% (Jan-May, 2010)

• Investment projects underway: 339

• New investment projects: 195

• Investment value: RMB 14.838 billion, up 29.25%, especially polyamide

• Production volume: 14,473,900 tons, up 13.43%

Profits of Chinese textile machinery builders jumps

The production value sold in the first five months of 2010 by Chinese textile machinery builders reached RMB32.225 billion, soaring 53.54%, according to the China Textile Machinery Association (CTMA).

Sales revenue of these enterprises amounted to RMB32.478 billion in the same period, representing a climb of 50.82%. The CMTA reported that these enterprises earned RMB1.842 billion in the same period under review, up 286.13%. They also invested in fixed assets with RMB2.104 billion, growing 18.67%.

Meanwhile, an export value of the Chinese textile machinery sector at US$625 million was registered, up 38.33%. Imports valued US$1.492 billion, or a rise of 76.78%.

Cotton spinning sector keeps growing in first 5 months

The Chinese cotton spinning sector performed well in the first five months this year, reaching a yarn production volume of 10,213,100 tons, up 17.41%, the latest figures of China’s National Bureau of Statistics (NBS) and the Chinese customs office showed. The accumulative fabric production volume was 23.888 billion metres, representing a growth of 17.38%. The growth in the woven apparel making was 20.36% in terms of production volume increase.

Total exports of cotton textile and apparel were valued at US$27.617 billion during the January-May period of 2010, up 16.49%. Among them, exports of cotton textiles reached US$8.452 billion (+21.93%) whilst those of cotton apparel were US$19.164 billion (+14.24%). In the meantime, China imported 3,547,000 tons of cotton yarns, or an increase of 38.18%.

A total amount of RMB27.6 billion was invested in the field of China’s cotton spinning sector, up 11.14%. There were 753 new investment projects, about the same number of registered last year.

Purchasing managers’ index drops below 50 in July

HSBC’s China Purchasing Managers’ Index fell below the boom-bust line of 50 this July for the first time since the depths of the global downturn in March 2009. The index dropped to 49.4 from 50.4 in June. The HSBC PMI emphasises more private businesses than the index tracked by the Chinese government.

The PMI is designed to provide an early indication of conditions in industry. A figure above 50 points to expansion.

The month-on-month deterioration in Chinese manufacturing, which prolongs a cooling trend that set in at the start of 2010, was led by the second successive drop in output and new orders. It was believed that the Chinese government steps to slow bank lending, fight property speculation and improve energy efficiency have resulted in a slowing activity in the manufacturing sector.

Economists at HSBC, however, added that it showed a slowdown, not a meltdown, and there was no need to panic.

Southeast Asia

Cambodia

US$5 more for minimum wage of apparel workers

The Cambodian Labour Advisory Committee (LAC) hosted a meeting to discuss a new minimum wage for the garment and shoe industry this July. The committee members agreed with the government’s recommendation to increase the minimum wage for regular workers by US$5, from the current US$50 per month. Probationary workers will also see their current US$45 per month increase by the same amount.

The LAC also decided to bundle the previously separated US$6 monthly cost of living allowance into the minimum wage. Regular workers will then count on a minimum wage of US$61 per month, whereas probationary workers will have US$56 per month. Workers paid on the basis of performance will also be guaranteed the new minimum wage, or more to reflect their productivity. The newly set minimum wage will come into effect on October 1, 2010 and will be reviewed in 2014.

South Asia

India

Lobbying efforts for invalidate child labour allegations

Accused of the charges of use of child labour in the textile sector, India is pulling up its socks ahead of a review by the United States America scheduled later this year

Apart from already having begun a process for lobbying for itself through law firm Sidley Austin LLP in the US, India is expected to engage US secretary of state Hillary Clinton, during her visit in the near future, to present a case for exclusion of India from the list.

Though isolated, instances of use of child labour in Indian garmenting industry has not gone down well with the US that accounts for 30% of India’s total apparel exports worth US$10 billion. In September 2009, US Department of Labour listed Indian garments under the Executive Order 13126 List (EOL) and Trafficking Victims Protection Reauthorisation (TVPRA) list. These are perceived trade barriers that could emanate from the US, according to the Indian apparel industry.

While US Federal Government does not procure anything from India currently, an EOL label could hamper India’s chances of trade with the US in future.

Likewise, a TVPRA listing is a reputation risk for Indian apparel industry that supplies to global retailers and brands like Walmart, GAP, H&M, Diesel, M&S, Levi’s, et al, all of who swear by strict policies on child labour. While trade linkage with labour issues is not immediately enforceable in the absence of legislation, the likelihood of legislation in the coming months could affect Indian apparel exports fear those in know of things.

With the next TVPRA list expected in September 2010 and the EOL list 13126 being finalised in the next three to four months, India has a initiated a process to defend itself through a three-pronged strategy: diplomatic channel, lobbying firm and the common compliance code.

Pakistan

Polyester fibre import duty to increase

Pakistan’s Economic Coordination Committee (ECC) of the cabinet approved a cascading import duty structure for pure terephthalic acid (PTA) products with effect from July 1. Under the decision, import duty on PTA has been reduced from 7.5% to 3%, while duty on polyester staple fibre (PSF) has been increased from 4.5% to 6%. The duty on polyester filament yarn (PFY) has been raised from 9% to 10%. The duty on bottle-grade product remains unchanged at 3%, while duty on blended yarn was increased from 9% to 10% and on fabric reduced from 15% to 10%.

Transit trade agreement signed with Afghanistan

Pakistan and Afghanistan agreed this July on a transit trade agreement to allow the landlocked Afghanistan to export goods to India through Pakistan’s land route.

Under the new agreement, Afghan trucks would be allowed to cross the Torkham border point and deliver goods to any Pakistani city. Afghanistan has already given this facility to Pakistani truckers. Afghanistan will use all ports of Pakistan for transit trade, the agreement says.

There was dispute over cross-border smuggling and other issues, but both sides decided to sign the agreement and keep on talks to resolve the remaining issues.

Afghanistan raised the issue of smuggling of textile products, particularly fabrics and other items through land route from Pakistan to Afghanistan during recently concluded talks on the Afghan Pakistan Transit Trade Agreement (APTTA). Sources told that the Afghan side has identified many items including textiles, fabrics, flour and other commodities, which are being smuggled from Pakistan to Afghanistan under the cover of bilateral trade.

The Afghan side also informed that the Pakistani authorities have repeatedly raised serious concern over the smuggling of transit goods, which are coming back from Afghanistan to Pakistan. However, the Pakistani side should also take measures to check smuggling from Pakistan to Afghanistan through land route. The smuggling of some items like textile products is frequently taking place from Pakistan to Afghanistan through land route, sources quoted Afghan side saying during APTTA negotiations.

They have also informed the Pakistani side that the Afghanistan is suffering revenue loss in the form of evasion of customs duty due to smuggling of textile items and others. Pakistani side assured the Afghan delegation that smuggling would be checked, as effective anti-smuggling activities and restoration of check posts and mobile squads has also helped in curtailing smuggling. Similarly, Frontier Constabulary (FC) has also taken measures to check smuggling across the border areas.

Federal Textile Minister Rana Farooq Saeed has urged spinners and value added exporters to evolve a joint strategy on the availability of yarn at affordable prices. He was chairing a joint meeting of textile industry at the Textile House .According to Rana, the ministry is working for the growth of all sectors of textile industry.

It may be noted that the ministry has imposed 15% regulatory duty on export of yarn in order to ensure availability of cheap yarn domestically. Earlier, it had capped exports to 50,000 tones and 35,000 tones a month respectively. However, the situation lead to serious marketing problems for value added exporters and efforts are now being made by spinners and value added exporters to arrest the awkward circumstances in collaboration with the textile ministry. All stakeholders are likely to meet soon in Islamabad to finalise a strategy in this regard. It is worth mentioning that a deadline for the removal of 15% regulatory duty is set to expire on July 27.

Bangladesh

Dramatic rise of garment export to Japan

Japan is considered a lucrative destination for Bangladesh’s garment as apparel exports to the country saw an extraordinary 148% growth in the first half of the current fiscal year compared to the same period a year ago.

Bangladesh exported ready-made garments worth US$34.043 million during the July-December period of 2009-10 compared to US$19.415 million of 2008-09. The country earned US$74.381 million in fiscal 2008-2009 and US$28.035 million in fiscal 2007-08 from apparel export, according to Export Promotion Bureau data.

Knitwear accounted for US$28.09 million during the same period, up from US$5.964 million a year before, the EPB data said. The country made shipments of home textile worth US$1.125 million during the July-December of the current fiscal year.

Japan has reduced its dependence on imports from China, which gave a boost to apparel exports of Bangladesh further increasing their sourcing from Bangladesh, said manufacturers and exporters. For instance, Japanese retail giant Uniqlo has opened a sourcing office in Dhaka.

Abdus Salam Murshedy, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said growth in Bangladesh’s apparel exports to Japan has much potential to become sustainable as cost of garment production is lower in the South Asian country.

New wage levels agreed

Workers in the Bangladeshi apparel industry also demanded a higher level of wages.

After a short period of dispute, workers in the apparel industry were able to reach consensus at a meeting with ministers, lawmakers, chamber leaders and apparel factory owners at the BGMEA office in Dhaka. Following the agreement made by labour leaders of 42 organisations to the new wage structure, workers resumed work from early August.

The current wage fixed in 2006 stands at Tk 1,662 (or about US$24) per month. The new wage structure proposed Tk 3,000 (around US$43) for minimum wage for an entry-level worker under grade-VII, Tk 9,300 for a worker under grade-I and Tk 2,500 for an apprentice.

Sri Lanka

Zero tariff under GSP+ ceases from Aug 15

The EU withdrew the GSP Plus concessions to Sri Lanka. There will be no GSP concession for textile and clothing from Sri Lanka starting August 15 this year.

The standard GSP beneficiary rates of duty will apply to all consignments from Sri Lanka, where GSP is applicable, which are released to free circulation on or after August 15, 2010.

There will be no transitional arrangements for goods, which will be in transit or in warehouse on that date.

All goods must be in free circulation by midnight August 14 to benefit from the GSP+ rates of duty, otherwise the standard GSP rates of duty will apply. This means for example, that for textile and clothing products a GSP rate, ranging from 5.5% to 9.6% will be payable instead of nil rates which are currently applicable under GSP+ for Sri Lanka, according to a circular issued by Her Majesty’s Revenue and Customs (HMRC) in the United Kingdom.

Europe

Nonwoven production statistics of last year released

EDANA, the international Association serving the nonwovens and related industries, found that the production of nonwovens contracted in weight by 6.3% since 2008, with 1,609,819 tonnes of nonwovens produced in 2009.

According to the recently released statistics on Nonwovens Production and Deliveries for 2009 by EDANA, the figures for Greater Europe (Western, Central and Eastern Europe, Turkey and CIS) show that as a result of the recent economic conditions, but also of the industry’s effort to provide lighterweight nonwovens (using less material) with the same function, the production of nonwovens contracted in weight by 6.3% since 2008, with 1,609,819 tonnes of nonwovens produced in 2009. This compares with the growth in the industry for 2008 of 1.2%.

After several years of double-digit growths, the weight of nonwovens sold to the personal care wipes market declined in 2009, but sales remained stable in terms of surface area, with minimal growth recorded. While total production figures, by weight, have fallen, the level of production in square metres did continue to grow (nearly 51,000 million in 2009). The average price of nonwovens remains nearly unchanged 2008 to 2009. The total turnover of the industry is estimated at around 4,790 million euros.

Jacques Prigneaux, EDANA’s Market Analysis and Economic Affairs Director stated that “While trade flows for both exports and imports slowed in 2009, the EU27 trade balance of nonwovens roll goods was still highly positive, in both volume and in value. Moreover, for each subcategory of nonwovens, EU27 is still a net exporter.”

The most significant decrease in tonnage was recorded in polymer-based (spunmelt) nonwovens. In addition, despite a small decrease of nearly 2.0% of nonwoven deliveries (in tonnes) to the hygiene business, this segment remains by far the largest outlet of the industry and increased its market share both in weight and surface area in 2009, according to EDANA.

Country Focus

Vietnamese textile industry grows but with heavy import of materials
by Ngo Tuan and Staff Reporters
The textile and apparel industry is one of the major drivers of Vietnam’s economy in these years. It was the only sector that was not severely impacted by the global economic downturn and remained the biggest foreign currency earner, contributing greatly to reduce the trade deficit of Vietnam in the past two years.


Industrial output of Vietnam’s textile and apparel industry (Source: GSO )
The 2009 industrial output from the textile and apparel sector amounted to approximately VND47.6 trillion (at 1994 constant prices), or 6.83% of the country’s gross industrial production value, based on figures of the General Statistics Office of Vietnam (GSO). Textile production value was at about VND25.6 trillion, down 4.95% from the previous year, while apparel production valued at VND22 trillion, registering a 16.20% decrease from the previous year.

Vietnam is currently one of the top ten textile and apparel exporters. The country’s textile and apparel export turnover reached US$9.07 billion in 2009, a decrease of 0.19% from the previous year. The industry was the country’s largest foreign currency earner in 2009, followed by oil and gas with US$6.20 billion. The US was the biggest buyer of Vietnam’s textile and apparel products, accounting for US$4.86 billion, or 53.61% of the industry’s total export turnover. Other major purchasing countries included the EU and Japan.


Cotton imports turnover by country in 2010 Q1 (Source: GSO )
On the supply side, annual production of material processing products can reach 410,000 tonnes, including 60,000 tonnes in the area of cotton ginning, and 350,000 tonnes in spinning, according to the Vietnam Financial Review published in May 2010 under Ministry of Finance of Vietnam.

The annual capacity of the weaving sector in Vietnam can reach one billion square meters, whereas that of knitting can achieve 200,000 tonnes, nonwovens at 5,000 tonnes, and dyeing and finishing at 700 million square meters. Along the downstream of the supply chain, the country can produce 2.4 billion units of apparel and 62,000 tonnes of terrycloth a year, the governmental financial review stated. The industry employs more than two million people annually.

However, industry players generally depend quite heavily on imported materials. Overall, local materials comprised approximately 44% of raw inputs in 2009, a 6% increase compared to 2008, government statistics showed.

The import value of fabric reached US$4.22 billion in 2009, representing 57.59% of the total import value of Vietnam. In terms of textile materials, China remained Vietnam’s biggest supplier, accounting for US$406 million of materials. Other significant suppliers for Vietnam’s textile and apparel industry included Korea, Taiwan and Hong Kong.

The dependence on imported cotton is, in particular, severe. The Vietnamese Ministry of Industry and Trade (MOIT) reported that the country imported about 303,093 tones cotton of for local production worth US$392.27 million in 2009.

In the first three months 2010, the cotton imports turnover of the country reached 91,380 tones at US$ 148.1 million, up 170.23% and 226.64% from the same period of the previous year respectively. The US was the biggest cotton supplier to Vietnam at US$45.57 million in the first quarter of 2010.

The total cotton planted area is currently 8,000 ha of land meeting about 4-5% of the local demand, the Vietnam Cotton Company (VCC) said. VCC and local government are implementing projects that spur local cotton plantation, despite challenges such as limited land area, lack of high quality cottonseeds and restricted finance sources.

Guarding from cotton price hikes

The relatively heavy dependence on foreign cotton puts Vietnam a passive role in the price bargaining of the cotton materials for textile manufacturing. The price of imported cotton rose by 35% from January 2010 to US$1.9-1.92 per kg in April, which was 50% more expensive than that in April 2009. The cotton price hikes in the world market from early this year has eaten up more and more profits of Vietnamese textile and apparel makers as their contracts with clients were made with respect to a relatively lower price of cotton, as mentioned by the Vietnam Textile and Apparel Association (Vitas).

“A high price level of cotton has caused us sufferings in profits as our exporting contracts were signed months ago,” said Nguyen Ngoc Binh, Deputy general director of Hoa Tho Textile & Apparel Joint Stock Corporation. The company imports a large quantity of cotton from abroad for its production.

To cope with the current situation, the Vietnam Textile & Apparel Association (Vitas) has been acting to ease the pressure faced by local textile and apparel makers, including numerous projects bolstering the local supply of cotton, yarns and fabrics.

First, the Vitas tried to help the local makers to diversify the supply of cotton. A seminar was organised by the association to promote the use of African cotton through establishing a direct trade link between Vietnamese enterprises and African cotton growers. Currently, the trade of African cotton is often conducted via trading companies based in Switzerland and France.

African cotton has been quite popular among Vietnamese enterprises due to the acceptable quality and competitive prices, the Vitas said. The imports turnover of cotton originated from Africa reached US$90.2 million in 2009.

“Making comparison with other sources shows that cotton imported from African countries offer a rather good quality at a reasonable price, making it suitable for textile and apparel production in Vietnam. For years to come, if cotton from local areas does not meet the demand of manufacturers, cotton from Africa could be the selected option of enterprises here,” said Nguyen Ngoc Binh, Deputy General Director of Hoa Tho Textile and Apparel Corporation.

On the other hand, the Vietnamese government has stepped up its work on a master plan for cotton production in the country. An investment budget of VND6,500 billion (US$343 million) for cotton and fibre production, which will be implemented by Vietnam National Textile and Apparel Group (Vinatex) and Vietnam Cotton Company.

Under this master plan, Vietnam will develop a total cotton planting area of 30,000 ha, targeting an annual output of 20,000 tones by 2015, and later up to 76,000 ha and 60,000 tones by 2020.

Hurdles ahead

Aside of the material sourcing issue, the Vietnamese textile and apparel industry has to strengthen itself and prepare for further challenges in the progressively globalised market at home and abroad.

The ASEAN-China Free Trade Area (ACFTA) is evaluating and proposing methods to promote economic cooperation, investment and commercial exchange between China and ASEAN members in the near future. Vietnam, Laos, Cambodia, and Myanmar are set to join the ACFTA in 2015, thereby giving Vietnamese textile and apparel companies five years to promote their fashion products in the local market before facing increased competition.

Moreover, Vietnamese businesses primarily focus on original manufacturing with a low added value for every unit of clothing sold to overseas markets. Without renowned brand names of their own, the manufacturers in this Asian country have limited bargaining power on price, while overseas buyers earn most of the value with a made-in-Vietnam apparel product sold in the foreign market.
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