The price of cotton - which was at US$O.8940 cents as of 11 October, according to Cotton Outlooks' A Index - is now decreasing and becoming more predictable, with better crops and an end to government intervention such as India's ban on cotton exports, which drove up prices.
As a result, this is a cost-effective time for manufacturers to be using cotton, and in fact some manufacturers who shifted to other fibers when cotton was expensive are now coming back, claims Mark Messura, US-based Cotton Incorporated's Senior Vice President of global supply chain marketing.
Indeed, the Indian government seems to be shifting away from trade distorting export bans and onto helping its domestic textile and clothing industry source locally made cotton. In July, Indian Textile Minister Dr Kavuru Sambasiva Rao announced that his government was considering granting interest subsidies to mills needing finance to cover their purchases of cotton. Being a seasonal crop in India's monsoonal climate, cotton deliveries are concentrated over five months starting in October and textile companies make bulk purchases then to gain from the lowest prices.
However, most of them are unable to secure their full supply as it requires a huge investment and substantial interest costs. "Cotton accounts for 65% of the total cost for yarn manufacturers," explains Anil Gupta, Vice President of the Textile Association (India). And while some textile and clothing manufacturers worldwide might wish they were similarly blessed with such abundant domestic supplies of cotton, Indian yarn manufacturers struggle to find solutions to fix quality related problems, especially when treating fresh cotton. Gupta said that spinning mills are increasingly investing in electronic devices to catch discolored fibers, trying to improve on the standard manual sorting that targets fibre contamination from ginning mills.
While India has been seeking a better balance regarding its domestic fibre supply and production, big international brands have been looking to balance their needs for reduced costs with available supplies by diversifying their sourcing.
This is happening as countries in Asia, especially China, become wealthier - increasing labour costs and the associated price of available fibre and fabrics. "It's a really interesting time because ten years ago, business moved largely to Asia, mostly to China, and now we're seeing it redistribute, especially within the last two years," says Messura. He thinks increased interest in sourcing and manufacturing in the Western hemisphere, especially when selling principally to US and Canadian markets, will be maintained, as will increased demand in lower cost centers such as Bangladesh, Vietnam, and Indonesia. But with China having built up such powerful integrated supply chains, it would be foolish to bet against the country continuing to supply major volumes of fibre to the world's clothing and textile industries.
Offsetting surging costs
Chinese manufacturers are eager to offset surging costs. For example, the Shandong-based Aoya Textile Group, which is known for manufacturing cotton yarns and fabrics, is now relying more on alternative fibres to reduce spending on cotton.
"In 2012, 10% of our total production was chemical fibre-based. Meanwhile, we are also diversifying our products through adding other fibres, including Modal, Tencel and bamboo fibre," a sales manager at Aoya told. The China National Textile & Apparel Council has been encouraging such diversification, with assistant president Yang Shibin publicly calling on Chinese manufacturers to use more blended yarns and new fibres as "there will be little changes in cotton prices in the near future."
Manufacturers have also been looking to energy conservation to combat rising costs. For example, the Shandong Guanxing Group has partnered with a local solar energy technology company to supply electricity to its machines, which could cut CNY2m (US$327,889) in costs each year, according to the company. Some other manufacturers have been looking to increase unit cost efficiency through increased automation, using robots to reduce labour costs. Such examples include Foshan, Guangdong province-based Everstar, a jeans manufacturer, which last year installed a fully automatic production line. "It not only largely reduces our labour costs, but also raises production efficiency by 30%," says Everstar CEO Fan Youbin.
Such improvements in production and environmental impact can also increase demand from international buyers too - something that also applies to Chinese fibre producers and their competitors. This follows the steady growth in demand for sustainable fashion in mature markets, whose impact goes right up the supply chain. Sarah Ditty, of the UK-based Ethical Fashion Forum, stresses that fibre producers using less water and energy are positioning themselves for sales into this market segment. "It's about risk management; better planning for increasing input costs," she says. The use of recycled materials is one strand of this trend. According to Darshan Lal Sharma, Managing Director of Vardhman Yarns & Threads, while most Indian mills remain cotton based, one third of Indian yarn manufacturers now use synthetic fibres, both alone and in blends that include filament made from recycled plastic bottles.
This article was originally published in the December 2013 issue of the magazine 'The Stitch Times.'