TexPro Trends: Unveiling the Future of Textiles

Welcome to the most recent TexPro newsletter, delivering insightful trends and valuable perspectives throughout the textile-apparel value chain. In this edition, explore the evolving landscape where trade intersects with sustainability, uncovering essential narratives that define the trajectory of the industry.

The market for dehaired Mongolian cashmere fiber has seen notable fluctuations in the first half of 2024. Both Brown and Light Grey cashmere fibers show a consistent increase in prices from January to July 2024, peaking in July. The 6-month moving average prices for both fibers initially declined slightly but then steadily increased, indicating market stabilization and subsequent growth over this period. Both fibers follow a similar trend in their price movements and moving averages, with Light Grey cashmere consistently having a slightly higher price and moving average compared to Brown cashmere.

Market Influences: Mongolia experienced a harsh winter, known as “Dzud,” leading to high animal mortality rates, which could drive another rise in cashmere prices. Additionally, the cashmere market faces scrutiny from animal rights activists. PETA UK recently condemned cruelty on farms, prompting several initiatives to promote sustainable cashmere. Among these is “The Good Cashmere Standard” (GCS), which aims to encourage more ethical production practices.

In Q1 2022, China's Footwear export value stood at 13.31 USD billion, slightly decreasing to 13.19 USD billion in Q1 2023, and further dropping to 12.54 USD Billion in Q1 2024, a 6.14% decrease from Q1 2022. This trend indicates a gradual decline in China's footwear exports over the three-year period.

This decline in export values can be attributed to multiple factors, including shifting market dynamics and external challenges faced by major footwear brands like Nike Inc. and H&M. These companies have reported inventory and demand issues, with Nike Inc. specifically projecting a mid-single-digit decrease in revenues.

Additionally, the overall market for shoe imports in the US, a key market for Chinese footwear, saw a significant reduction of 37.7% in Q1 2024 compared to Q1 2022. These factors collectively contribute to the observed decrease in China's footwear export values.

The Consumer Price Index (CPI) for South Korea shows a general upward trend from July 2023 to June 2024. The index starts at 111.29 in July 2023 and rises to a peak of 114.10 in May 2024 before a slight decline to 113.84 in June 2024. This indicates a period of inflation, with prices increasing steadily over the 12-month period. Notably, the CPI experienced small fluctuations, such as the slight drop from October 2023 (113.26) to November 2023 (112.67) and then again from May 2024 to June 2024, suggesting some variability in price stability. Overall, the consistent increase highlights growing inflationary pressures in South Korea over the observed period.

The ACN market has dipped slightly in both RMB and USD due to weak demand. Traders have lowered their offers, with prices now at 9,100-9,300 yuan/mt, ex-tanks. ABS plant operations are at 60%, while acrylic fiber plants are running at 75%. This week, the ACN market stayed stable despite some unit restarts. Prices are near the cost line, and plants are considering price hikes even though demand is moderate. Propylene is priced around 7,175 yuan/mt, and liquid ammonia prices have weakened a bit. Supply remains steady with consistent operating rates in July.

Demand from ABS and acrylic fiber industries shows average profitability, limiting the potential for increased production and hinting at possible cuts. There are no planned changes apart from scheduled maintenance. Weak off-season demand could create sales pressure, but cost pressure should keep prices stable in the short term.

Myanmar, a significant garment exporter country in Southeast Asia, is starting to show signs of strain. Rising costs and a shrinking labor pool are major factors contributing to the industry's challenges. According to the Myanmar Garment Manufacturers Association (MGMA), 298 member factories had ceased operations as of December 2023. This number represents a 52-factory increase from the previous year and accounts for 36% of total member factories. The apparel exports has decreased by 14% between 2022 and 2023.

In 2022, apparel exports in dollar terms reached a historic high, driven by low wages and a weak currency, making apparel Myanmar's top exporting product. Despite this peak, many garment factories are now struggling to stay open. Reports have indicated of worker shortages for about six months in a year, according to a labor relations official at MGMA. Workers have increasingly sought better-paying opportunities either in other factories or abroad, reflecting changes in worker's sentiment. The military regime's policies have also influenced the industry. In October, the regime mandated companies to provide a special allowance on top of the minimum wage, effectively raising the daily minimum payment to 5,800 kyat ($2.76). However, with rice prices having tripled since 2018, workers have not significantly benefited from this wage increase.

Additionally, the regime has promoted overseas migrant work to address domestic joblessness and a shortage of foreign currency. The ongoing conflict between the regime's forces and armed ethnic groups has further driven younger workers to leave the country. Small and midsize apparel factories are particularly affected, facing higher wages, supply disruptions due to armed conflict, and increased fuel costs for generators.

Compounding these issues, global brands are reassessing their business engagements with Myanmar, leading to a decrease in orders.

Vietnam's minimum wage ( average of all regions) increased by 6% from last year and 25% since 2018, marks a significant shift in the economic landscape. For the textile industry, which has long been a cornerstone of Vietnam's export-driven economy, this wage hike carries profound implications. On one hand, higher wages can boost domestic consumer spending and improve worker satisfaction, potentially leading to increased productivity and a more stable workforce. On the other hand, textile manufacturers may face squeezed profit margins as labor costs rise. This could prompt a shift towards greater automation, or drive companies to seek efficiency improvements to maintain competitiveness. Additionally, the increased cost of production might compel some firms to reconsider their pricing strategies or explore new markets. Overall, while the wage increase reflects a growing economy and improved living standards, it also challenges the textile industry to innovate and adapt in order to thrive amidst evolving economic conditions.