At
US$2.96 per square metre equivalent Sme) in 2009, the price was 6.1%
down on the previous year and 21% lower than the average price of
around US$3.75 per sme which prevailed for much of the 1990s”.The
fall will have serious consequences for apparel suppliers in the USA
and abroad who are struggling against ever diminishing margins ..One
of its main causes was the elimination of safeguard restrictions on
imports from China at the end of 2008. Once supplies were no longer
constrained, imports from China surged in volume by 10.7% – even though
the USA was in recession ..However, the surge was achieved by
slashing prices – at least in the categories which had been subject to
restrictions during 2006-08 ..In the case of men’s and boys’ cotton knitted shirts, the average price of imports from China plunged by 25% in 2009 alone ..In two other categories – men’s and boys’ cotton trousers and women’s and girls’ cotton trousers – it dropped by 20% ..Imports of women’s and girls’ cotton knitted shirts, meanwhile, fell in price by 18% ..”strong>Producers under pressure”/strong> ..The fall in Chinese prices forced other suppliers to follow suit – including those in Vietnam ..In
fact Vietnamese clothing prices dropped for the first time since 2000 –
which serves to indicate the pressure that Vietnamese producers are
under ..At US$3.14 per sme, the average price of clothing imports from Vietnam was at its lowest level since 2002 ..Furthermore,
the drop was in sharp contrast to increases between 2000 and 2008 which
saw Vietnamese clothing prices more than double, from US$1.58 per sme
to US$3.42 per sme ..The surge in imports from China and the fall in Chinese prices have had a severe knock-on effect on US suppliers closer to home ..US clothing imports from Mexico and Honduras, for example, fell at double digit rates in 2009 – in both value and volume terms ..Furthermore, the decline in clothing imports from Mexico and Honduras has hit the US textile industry ..This
is because a large portion of imports from Central American and
Caribbean Basin countries are made from US yarns and fabrics whereas
imports from Asian countries have little or no US content ..Not
surprisingly, these circumstances have had a detrimental effect on US
production and, more specifically, on raw cotton usage ..Indeed,
the US Department of Agriculture (USDA) has predicted that the amount
of raw cotton used by US textile mills in the 2009/10 cotton season
will fall to its lowest level in 115 years ..The US industry is hopeful, though, that production will recover as the US economy emerges from recession ..”strong>Sourcing shift”/strong> ..Furthermore, there are signs that the surge in imports from China may be coming to an end as traders look to other sources ..For example, Li and Fung – a major sourcing group based in Hong Kong – is planning to reduce.its dependence on China by shifting some of its sourcing to other countries ..Li
& Fung’s decision has been prompted by rising costs and labour
shortages in China as orders pick up and production recovers ..It
has also been prompted by the possibility that the renminbi (yuan) will
be revalued in response to mounting pressure from the US government ..On top, there is growing protectionist sentiment in the USA which could lead to further restrictions on trade with China ..But there are few signs that buyers will step up their purchases from the USA – or even from Latin America ..Instead, they will shift to countries such as Vietnam and Bangladesh which can supply large volumes at rock bottom prices .
Date:4/27/2010
Source:Reuters