NATIONAL

• India-Cotton mills forced to scale down production by 15-20pc
• Indian basket of crude at more than six months low of $47.98 per barrel
• India and Sacu likely to finalize very limited agreement
• Global crude oil price of Indian Basket was US$ 47.77 per bbl on 19.08.2015

INTERNATIONAL

• Weakening of Yuan likely to have negative impact on Vietnamese exports in the long term
• Bangladesh-Cotton consumption to rise on higher demand
• Spanish company out with mosquito-repellent shirt
• Ethiopia’s traditional weaving from white cotton is dying out
• Investors to set up factories elsewhere with decline in China’s competitiveness

Textile Raw Material Price 2015-08-19

Source : Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.15608 USD dtd. 19/08/2015)

The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

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India-Cotton mills forced to scale down production by 15-20pc

Representatives of the Confederation of Indian Textile Industry, South India Millers' Association, North Indian Millers Association, and Texprocil met in New Delhi on Monday to take stock of the situation faced by cotton spinning mills. Currently, the cotton spinning mills are facing crisis due to high input costs and subdued demand and thus decided to go slow on production.  In the meeting, it was decided to appoint an agency to study the gravity of the situation, prepare a memorandum, and send to the government. Most of the mills have either already cut production by 15-20 per cent or are mulling to do so soon. Salem-based Sambandam Spinning Mills is one such. Its director S Dinakaran said that the mill is keeping operations suspended for one day every week, starting this month. This is the first time in 40 years that the mill has faced such a crisis that production has had to be scaled down. While bigger players are resorting to a one-day production cut, smaller ones have opted to shut production for two days a week. The plight of cotton mills in north India, too, is similar.

What has added to the woes of the sector is the dramatic increase in capacity over the past few years on the back of incentives offered by various state governments. This, as well as a drastic fall in export demand, has put the sector in a shambles. According to D K Nair, secretary-general, Confederation of Indian Textile Industry, the sharp decline in exports from a peak of 140 million kg a month last year to an average of 100 million a month in this quarter has put the spinning sector in doldrums. A 40 percent decline in export demand in such a short span was unexpected and the sector was not prepared for this. The devaluation of yuan might further hamper exports as Indian yarn has become more expensive in the international market in the after effects of Chinese currency's fall. Dinakarn, who is also the chairman of Texprocil's yarn committee, said that the Chinese buyers have been delaying the LCs (Letters of Credit) and not opening the LCs. The mills are bleeding and there is no option other than suspending production. Of the 500 small mills in Tamil Nadu, most are keeping operations shut once or twice a week. These mills are into blended yarn and fibre. Since there is no excise duty on cotton, the 100 per cent cotton yarn makers are disrupting production only once a week.

President of South Indian Spinners' Association, C Varadarajan said that as the textile sector is one of the largest employers, production cuts for a longer time could result in layoffs, resulting in labour unrest. The situation is precarious and the government should provide immediate relief to save the livelihood of millions engaged in textile sector.  There is also a need to revive the interest subvention, for release of pending TUF, and introduction of measures to expedite exports. According to experts, the delay in disbursement of Technology Upgradation Fund, or TUF, has affected the sector.

Source: Global Textiles

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Indian basket of crude at more than six months low of $47.98 per barrel

The Indian basket of crude oil price has plummeted to $47.98 a barrel, the lowest in more than six months, as global benchmarks continued their slide due to higher US stockpiles and production volumes, coupled with a rout in the Chinese equity market, dampened demand. The subdued sentiment was firmed up also on the prospect of Iran increasing production, with the lifting of sanctions, and the insistence of the Organization Of Petroleum Exporting Countries (OPEC) to not cut production from the current levels of 32 million barrels per day (mbpd). Brent crude for October delivery eased 23 cents to $48.58 a barrel on the New York Mercantile Exchange.

The price of the Indian crude basket was the lowest since January 30, when it stood at $46.73 a barrel. Between April 1 and August 18, the price had averaged at $57.26 a barrel.  K Ravichandran, senior vice-president at research and ratings at ICRA, said: “The government had budgeted for an average price of $70 per barrel for this financial year. If the average price of $57 per barrel is sustained for the rest of the year, it will lead to Rs 84,500-crore savings in import bill and Rs 11,700-crore savings in the subsidy bill.”  Currently, every $1 decrease in crude oil price pulls down import bill by Rs 6,500 crore and the government’s subsidy burden by Rs 600 crore. However, the benefit would be limited due to the ongoing depreciation in the rupee. Every Rs 1 increase in the exchange rate of dollar increases oil import bill by Rs 7,455 crore, according to the Petroleum Planning and Analysis Cell (PPAC), an arm of the oil ministry.  The ongoing dip in crude oil prices will lower under-recoveries for refiners and translate into reduced subsidy burden sharing for upstream companies such as Oil and Natural Gas Corp. The government had exempted upstream firms from liquified petroleum gas subsidy sharing. It also said it would bear subsidy of upto Rs 12 a litre and anything over that would be borne by these firms.

For Indian refiners — Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp — the declining crude oil prices are a major positive as their working capital requirements would reduce along with lower losses on subsidised sale of petroleum products. The under-recoveries of oil marketing companies came down from Rs 139,869 crore in 2013-14 to  Rs 72,314 crore the last financial year — thanks to diesel deregulation and the roll out of direct benefits transfer in LPG scheme. In the current financial year, the government was budgeting for a petroleum subsidy bill of Rs 30,000 crore, including Rs 22,000 crore on LPG sales and the rest on kerosene. The government might now be able to save Rs 7,800 crore of these due to the decline in crude rates. India imported 189 million tonnes of crude oil at $112 billion in 2014-15. With lower crude oil prices slated to create Rs 84,500-crore cushion for importers, OMCs might pass on the benefit to consumers by reducing retail prices of petrol and diesel.

Source : Business Standard

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India and Sacu likely to finalize very limited agreement

India is South Africa’s sixth-largest trading partner with trade last year amounting to nearly R50bn. Barriers to trade in India and the sensitivity of some of the products it has proposed for preferential treatment are the main stumbling blocks to concluding a trade agreement. The negotiations between India and the Southern African Customs Union (Sacu) to provide a legal and institutional framework have been going on for nearly two years.

It is now likely that a very limited agreement will be finalized, covering only a small percentage of goods included in the Sacu tariff book. This would undermine the achievement of one of the objectives of the Brics (Brazil, Russia, India, China and SA) association to promote south-south trade. Most of SA’s Brics partners are more competitive.

Department of Trade and Industry chief director of trade negotiations Niki Kruger told members of Parliament’s economic development committee that great difficulties had been experienced in finalizing the India-Sacu offer.

A lot of concerns have been raised by both business and labour in terms of the nontariff barriers in the Indian market. It is very difficult to penetrate the Indian market as each of the different regions has different processes in place. So it is not easy for some products to move across the country because the different provinces have their own regulations.

The other problem is that India’s list of requests is in very sensitive sectors like clothing and textiles, chemicals, plastics and some agricultural products. So they are having difficulties in agreeing on the offer that they can make to India which has been holding up negotiations.

Ms Kruger said that they are now looking at an early conclusion of the negotiations but at a reduced level of ambition.

India requested preferential treatment for three lines of fish; processed agricultural products such as coffee, tea, pasta and other grain products; canned vegetables, fruit juices, and tobacco products.

Its list includes chemical products, perfumes and cosmetics, herbicides and fungicides, plastics, rubber and rubber products, leather products, cotton, synthetic yarn, woven fabrics, textiles, metal and automotive products.

Source : Yarn and fibre

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Global crude oil price of Indian Basket was US$ 47.77 per bbl on 19.08.2015

The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 47.77 per barrel (bbl) on 19.08.2015. This was lower than the price of US$ 47.98 per bbl on previous publishing day of 18.08.2015.

In rupee terms, the price of Indian Basket decreased to Rs 3115.56 per bbl on 19.08.2015 as compared to Rs 3129.26 per bbl on 18.08.2015. Rupee closed at Rs 65.22 per US$ on 19.08.2015. The table below gives details in this regard:

Source : Ministry of textiles

Weakening of Yuan likely to have negative impact on Vietnamese exports in the long term

The yuan weakening likely to have negative impacts on Vietnam’s economy in the long term, according to Dang Phuong Dung, deputy chair of the Vietnam Textile and Apparel Association (Vinatas), as Chinese imports to Vietnam will increase in the time to come as a result of the weaker yuan. This will discourage enterprises to spend money to increase their localization ratios. With low locally made content, Vietnamese products will not be able to satisfy the requirements on product origin to enjoy preferential tariffs within the framework of FTAs and the Trans Pacific Partnership (TPP). The Ministry of Planning and Investment (MPI) has a warned that the weaker yuan will badly affect Vietnam’s exports to China, especially farm produce exports. Chinese exports will become more competitive in the world market thanks to low prices. In fact, it will be more difficult for Vietnamese exports to compete with made-in-China products. Warns the Ministry of Planning and Investment (MPI). However, according to Le Quang Hung, Chair of Garmex, a textile and garment export company, devaluation in yuan would not have an impact on the company’s production plan, because Garmex is implementing contracts signed with Chinese partners under which the payment will be made in US dollar. However, things will get worse next year, when the company takes new orders.

Vietnamese exporters expect to enjoy benefits from the Vietnam-EU Free Trade Agreement (FTA) as the import tariff on Vietnam’s textile & garment products will be cut from 9 percent to zero percent after seven years.  The benefits would not have much significance for Vietnamese exporters because of the 3 percent yuan devaluation. Hung said that Vietnam has widened the foreign exchange trading band by one percent so as to help boost exports. However, Vietnamese products are still more expensive than Chinese. Moreover, it is still unclear when Vietnamese exporters can enjoy the benefits from FTA as the agreement still needs to be officially inked. Meanwhile, the risks from the yuan devaluation will come immediately.

With the yuan/dollar exchange rate at 6.2298/1, the company could earn $482,000 when exporting a consignment of products worth 3 million yuan. Now as the dollar has appreciated, the company will earn $474,000 only for the same consignment of goods.

According to the report by The HCM City Securities Company (HSC), yuan depreciation would have a negative impact on Vietnam-China trade balance. It is estimates that Vietnam’s trade deficit will incrase by 0.6-0.8 percent with every one percent of the yuan devaluation.

Source : Yarn and fibre

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Bangladesh-Cotton consumption to rise on higher demand

Cotton consumption in Bangladesh is set to increase 2.73 percent year-on-year to 5.65 million bales in fiscal 2015-16 on the back of higher demand from garment manufacturers, a US agency said in a report last week. Import of cotton will also increase to 5.55 million bales (480 pounds make a bale) in the current fiscal year from 5.40 million bales a year earlier, according to the United States Department of Agriculture. The USDA data also showed that the country will end this fiscal year with 1.30 million bales of cotton, which is close to last year's stock of 1.28 million bales.  Currently, local spinners and weavers have the capacity to consume 10 million bales of cotton, but they are unable to go into full production due to inadequate supply of gas and power to industrial units.  Cotton consumption in China, the largest apparel supplying country, will remain the same this year at 34 million bales.

China is projected to reduce the import of cotton to 5.75 million bales in fiscal 2015-16 from 8.25 million bales a year earlier, the data showed. Up to July, China had the largest stock of cotton at 62.50 million bales, which is half the global cotton demand, the report said.   

Source: The Daily Star.

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Spanish company out with mosquito-repellent shirt

Spanish textile company STINGBye based in Catalonia has come up with a shirt that repels mosquitos and other insects such as mites, ticks, lice and bedbugs, after devoting four years to research and development.  STINGBye company introduced the product to the Spain market in June, and it is available across 80 pharmacies in Spain. The company will apparently begin exporting its product in the near future. The shirt contains Permethrin, a repellent that is added to the completed garment and holds for up to 100 washes; the insecticide has an efficiency rate of 94 percent, and the shirt has been certified by Sanitized, the world-leading Swiss Company in the antimicrobial hygiene solutions. The repellent agent does not generate any odor, while the garment has a soft touch for children and adults and serves against all types of insects, STINGBye partner Silvia Oviedo said.

The shirt could be useful in tropical countries suffering deadly diseases affected by insects like dengue fever. Therefore, the company plans to export the product as of next September.  Insect repellent clothing has been catching on throughout the world, particularly in Asia – where retailers sell cardigans, hoodies and leggings that deter mosquitos.

Source : Yarn and fibre

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Ethiopia’s traditional weaving from white cotton is dying out

Ethiopian fashion has entered the international fashion industry, with well-known Ethiopian designers and models running fashion lines in many countries. Despite a fast growing fashion and design industry, centuries-old traditional weaving is noticeably dying out in Ethiopia. In ancient times, Ethiopians wore traditional outfits woven from white cotton with wooden looms.  Though weaving has been a way of life for centuries all over Ethiopia, nowadays, traditional weavers supply their white cotton cloth to designers, who in turn make all sorts of modern designs, the Dorze ethnic group in the south of the country is best known for weaving and their variously textured woven cotton cloths.  Ethiopian weavers mainly supply their products to the local market. Designers of hand-woven traditional garments buy the products, work on a design, sew and embroider the cloth, before exporting the end product. These end products come in a variety of forms: skirts, shawls, shorts and trousers, scarfs, caps, bags, sweaters and shirts among others. Traditional weaving is nearing extinction because the new generation is not showing interest, and for good reason. Some Ethiopian weavers said that they are improving quality of their products and receiving greater demand – but are not being paid well for their labor and time.

For instance, they said that they are paid nearly $40 for cloth sufficient for a shawl and a dress, but only $6 for a scarf, which is very low considering the weaver’s labor and time.

The Traditional Weavers Selam Teramaj Plc association established 13 years ago has 30 members. Some members of the association have learned weaving from their family. But the new generation is not interested in weaving either they want to lead to better life or find it to be a tiresome work and the income gained from it is not satisfactory compared to the labor and time taken. Designers are the ones getting profit and recognition out of their work. There is no question of the importance of designers in promoting their traditional cloths across the world. However, weavers are the ones doing 80 percent of the work and are not getting fair payment or recognition.

Genet Kebede, owner of Paradise Fashion said that the final product depends on the quality of input, including yarn and threads among others, which increase demand for their traditional cloth and make them competitive in the global market. Genet, who attended design school in Buenos Aires, Argentina for three years, and also studies fashion in Italy, exports her hand-woven fabrics to the UK. She have been in this business for 22 years. According to her, they do not have much choice here, but in other countries there are different kinds of yarn ranging from synthetic to natural yarn and cashmere. According to Genet, the way to preserve Ethiopia’s traditional weaving industry is to incorporate weaving into technical and vocational education and other higher learning institutions’ curricula. This will help future generations preserve their unique traditional weaving. If there are no weavers then there will be no hand-woven garment designers too and thus weavers should earn an appropriate income.

Source : Yarn and fibre

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Investors to set up factories elsewhere with decline in China’s competitiveness

China’s rapid decline in competitiveness as a manufacturing centre is being displayed both in market analysis and in the number of domestic and foreign investors who are looking elsewhere to establish their factories. China has swung from being the land of opportunity to the economic sick man of Asia.  According to a new report by the Boston Consulting Group (BCG), the wages adjusted for productivity have tripled in China in the last decade. Mexico is now a cheaper manufacturing centre than both China and Brazil. Brazil is now a far more expensive manufacturing centre than the U.S., Canada or Britain. Factories in China are now only slightly more economical than those in the U.S., according to the BCG’s calculations, based on half a dozen factors in manufacturing costs. China sits at 96 on the BCG’s index, Canada at 115, the U.S. at 100, Mexico at 91 and Brazil at a whopping 123. Australia has the dubious distinction of being the world’s most expensive manufacturing centre, coming in at 130 on the BCG index.

There are two main reasons for China’s declining competitiveness are rising wages which has exposed the deplorable levels of productivity among Chinese workers and manufacturing systems. More systemic is the state control of the energy sector and its milking of the system for inflated profits. This is unlikely to change while China remains a one-party state and the Communist Party insists on keeping monopolistic control of what it sees as critical strategic sectors, under which electricity costs in China have risen by 66% and natural gas costs by 138% in the past decade. The upshot is capital and investment flight from China. Undoubtedly, an influence is the prospect of the creation of the 12-member Trans-Pacific Partnership (TPP) free trade zone, from which China is excluded. Chinese businesses and those operating in China don’t want to be caught wrong-footed when the TPP – or a trimmed-down version – comes into being. They want to be inside the free trade zone fence. So they are seeing sights unimaginable only a few years ago, such as Chinese textile companies setting up operations in the U.S. cotton-growing state of South Carolina.  Until now, South Carolina has exported its cotton to China for working into textiles. But several Chinese companies see production at home becoming increasingly unprofitable as costs mount. They reckon it is more and more attractive to set up their textile mills at the place where the cotton is grown, the productivity is high and the tax breaks are seductive.  However, the shift is not confined to China. Other emerging economies, such as Brazil, which only a few years ago were seen as being dominant global manufacturing centres for the foreseeable future, have dropped like stones.  At the same time, countries like the United States, Britain and, indeed, Canada, which in the last 20 years or so have been sidelined as too expensive to be profitable, are suddenly looking attractive again.

A significant element in the new productivity picture is energy costs. For Canada and British Columbia, this raises the question of whether it is wise to encourage the export of natural gas and petroleum, and, indeed, other resources such as raw logs. The picture emerging is that industries will move to jurisdictions with attractive and balanced productivity costs. Labour costs are only part of that equation.

Source : Yarn and fibre

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