Fabricating the Future: Textile and Apparel Market Trends

Welcome to the latest edition of TexPro Insights! In this issue, we delve into the most current trends and innovations shaping the textile and apparel industries. From breakthroughs in raw material sourcing to shifts in global trade dynamics, this newsletter is your go-to source for staying ahead of the curve.

Join us as we navigate the evolving landscape of textiles and apparel!

The Logistics Performance Index (LPI)? by the World Bank is a benchmarking tool that helps countries identify their challenges and opportunities in trade logistics. The LPI 2023 ranks countries on six dimensions of trade -- including customs performance, infrastructure quality, and timeliness of shipments. The data used in the ranking comes from a survey of logistics professionals answering questions about foreign countries with which they operate. The components analyzed in the International LPI were chosen based on recent theoretical and empirical research and on the practical experience of logistics professionals involved in international freight forwarding.

They are:

? The efficiency of customs and border management clearance (“Customs”).

? The quality of trade and transport infrastructure ("Infrastructure”).

? The ease of arranging competitively priced shipments ("Ease of arranging shipments”).

? The competence and quality of logistics services—trucking, forwarding, and customs brokerage (“Quality of logistics services”).

? The ability to track and trace consignments (“Tracking and tracing”).

? The frequency with which shipments reach consignees within scheduled or expected delivery times (“Timeliness”).

The LPI uses standard statistical techniques to aggregate the data into a single indicator that can be used for cross-country comparisons.

The Virgin POY market experienced considerable price fluctuations throughout 2023-2024, primarily driven by feedstock cost changes, downstream demand dynamics, and inventory levels. In Q3 2023, PFY prices saw an upward correction, supported by rising feedstock costs and moderate demand from downstream plants. However, demand softened towards the end of the quarter, leading to a slight decline in operating rates. By Q4 2023, prices took a sharp downward turn as crude oil prices dropped significantly in early October, causing polyester feedstock costs to fall. This led to an accumulation of PFY stocks as downstream buyers, affected by the Mid-Autumn Festival and National Day holidays, slowed down their purchases. By the end of October, PFY prices had hit their yearly low as inventories built up, further pressuring the market.

In Q1 2024, PFY prices saw an upward consolidation due to higher crude oil and melting costs, despite weaker demand from DTY plants and fabric mills. The pre-Spring Festival replenishment boosted demand for PFY, helping to reduce stock levels. However, by Q3 2024, the market shifted back into downward correction mode as oil prices fell again, dragging down the cost of melting. PFY companies resorted to selling with discounts, and both virgin and recycled PFY prices followed the downtrend of feedstock prices. In September 2024, PFY prices continued their downward trajectory, as polymerization costs decreased, and downstream procurement remained muted, forcing filament yarn producers to lower prices further.

By November 2024, the PFY market saw weak corrections as oil prices remained stable and the PX market struggled with oversupply. With high inventories and lackluster demand, the entire industrial chain faced tight profit margins, resulting in limited price decreases. Throughout this period, recycled PFY prices mirrored those of virgin PFY but remained consistently lower. As the year concluded, PFY prices had settled at some of their lowest levels, driven by oversupply and weak demand, signaling a challenging period for producers in the coming months.

From 2019 to 2020, Egyptian cotton prices declined from $122.18 to $114.16, primarily due to the global economic slowdown caused by the COVID-19 pandemic, which reduced demand for cotton as manufacturing activities paused worldwide. In 2021, prices surged to $198.18 as economies rebounded, driven by increased demand for high-quality cotton and global supply chain disruptions that limited availability. The peak came in 2022 when prices reached $254.38, spurred by continued supply chain challenges and higher demand for premium fibers, characteristic of Egyptian cotton.

In 2023, prices corrected to $153.4 as markets adjusted with the recovery of global supply chains and the stabilization of demand. However, production challenges, including a decline in output, likely impacted prices. In 2024, prices slightly increased to $164.63, reflecting a recovery after the previous year’s correction, and signaling a period of stabilization in line with ongoing global demand, despite rising production costs and other challenges. Over the six-year period, Egyptian cotton saw a compound annual growth rate (CAGR) of 6.15%, indicating a consistent upward trend despite fluctuations.

Key factors influencing these changes included global supply chain disruptions in 2021 and 2022, the Egyptian government’s price guarantees in 2024 to protect farmers’ incomes, and the global shift towards sustainable and premium cotton. The rise in production costs and the 32% decline in production in 2023 added additional pressure to the market, yet the ongoing demand for high-quality cotton supported price resilience.

Sri Lanka's exports of innerwear to North America and Europe have followed similar trends over the past decade. While exports to North America began at a lower level compared to Europe in 2014, North America quickly emerged as the leading destination for Sri Lankan innerwear exports. From 2014 to 2019, exports to North America grew steadily, reaching $800 million in 2019. However, in 2020, the value dropped significantly to $565 million due to global supply chain disruptions caused by the COVID-19 pandemic.

By 2021, exports rebounded to near pre-pandemic levels. Nonetheless, a downward trend has been observed in recent years, likely influenced by the ongoing economic crisis in Sri Lanka. As a result of this economic instability, major textile brands have shifted their focus from Sri Lanka to India for placing orders. Innerwear exports to Europe initially experienced a slight decline but eventually followed a pattern similar to that to North America.

Sri Lanka recorded its highest innerwear exports to Europe in the past decade in 2022, with a value exceeding $700 million. However, this figure dropped to $590 million in 2023. The total exports in 2024 will be a critical indicator for assessing the future trajectory of Sri Lanka's innerwear trade — whether the downward trend continues or a recovery is observed.