Textiles Intelligence, the global business information company, has issued a 6-page report titled:
“Talking strategy: apparel supply chains hit by perfect storm as costs rise on multiple fronts.”
According to the report, the global apparel supply chains are under pressure as fibers, and other textile materials rise, energy costs soar, and freight costs escalate. As measured by the Cotlook A Index, the global cotton price almost doubled between April 2020 and December 2021, from 64 US cents/lb to 120 US cents/lb.
Finished goods have been taking longer to reach their destinations as shortages of containers and outbreaks of COVID-19 have halted operations and caused delays at ports. In fact, in many destination ports, the average median times spent by containers in depots referred to as “dwell times”, reached near-record levels in 2021 due to severe congestion. Furthermore, to add to the apparel industry’s woes, companies importing apparel and other textile products into the US market, which contains materials sourced from Xinjiang province in China, face a new hurdle due to the Uyghur Forced Labor Prevention Act (UFLPA).
Under the UFLPA, companies that want to continue importing goods made in Xinjiang must provide “clear and convincing evidence” that the goods in question were not manufactured with forced labor. This places the onus on companies rather than customs officials. However, global apparel supply chains are notoriously complex, and it is often impossible to trace the origins of materials used in the manufacture of a garment. This will make it immensely difficult for companies to guarantee that the products they are supplying do not contain materials sourced from Xinjiang province in one form or another.
Apparel brands are likely to play safe, and source from locations which they can be confident do not use materials made in Xinjiang province To ensure that they comply with the UFLPA. This would limit the amount of cotton available for their products significantly because Xinjiang province accounts for around 90% of the cotton produced in China and 20% of the cotton produced worldwide. In this scenario, the amount of cotton available to apparel brands could be reduced by 20% or more, and, as a result, cotton prices would likely rise.
The complete report can be accessed here.
