Cotton costs may drop 2% in 2024, synthetic fibres' may rise: S&P GMI

While manufacturers worldwide are already experiencing slower supplier delivery times due to shipping disruptions caused by the Red Sea conflict and supplier delivery times for consumer goods manufacturers more broadly have fallen to their slowest since June 2022, firms have recognised the emerging challenges but are not yet willing to list the impact, the company said.

A detailed review of 10 firms that have made a directional call on the impact of disruptions shows higher costs are a bigger challenge than delays at this stage.

Spot container rates on Asia-to-US east coast routes have increased by 165 per cent on February 5 from December 1 last year, S&P Global Commodity Insights data shows.

Long-term contracts may mitigate the impact of short-term container rate rises, but also run the risk in embedding higher costs for longer should spot rates remain elevated, it noted.

The seasonality of apparel supply chains means delays will become a bigger factor during the July-September peak season for sales running from back-to-school to Black Friday, S&P GMI’s Chris Rogers wrote on the company’s website.

The proportion of firms discussing supply chains in a neutral light—suggesting a ‘don't yet know’ stance—rose to the highest level in the first quarter (Q1) this year since Q1 2020.

The proportion flagging positive supply chain effects fell to 39 per cent from 50 per cent in Q4 2023. The proportion of firms mentioning supply chains in a negative manner also dropped to 12 per cent in Q1 2024 from 19 per cent in Q4 2023.

Options to tackle the higher costs, delays and uncertainty include absorb the costs against earnings, change transportation routes or modes, carry more inventories, and alter sourcing practices, Rogers wrote.

Fibre2Fashion News Desk (DS)