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ECFA - Win-lose situation for textile sector

04
Feb '10
The proposed Economic Cooperation Framework Agreement (ECFA) is creating various emotions amongst the textile fraternity. The ECFA could make winners or losers out of various companies and even within group companies.

The proposed ECFA with China is expected to remove trade barriers on a large range of goods and will play a critical role on the fortunes of the textile sector. Taiwan's Lealea Group could witness mixed fortunes among its diversified companies.

One group subsidiary, Li Peng Enterprise Co., the largest nylon chips manufacturer in Asia, is expected to benefit, but another subsidiary, Lealea Enterprise Co., a maker of polyester chips and filament, will struggle to avoid being negatively affected.

Li Peng accounts for 25 percent of China's demand for nylon chips and is expected to further expand its market share in the next few years because of China's growing import demand for the raw material and dismantling of trade barriers.

Currently nylon chips attract 6.5 percent import duty in China, but once the ECHA agreement comes in to force and if textiles are amongst the first list of goods to have free-trade access, demand for nylon chips is expected to sky-rocket.

If Chinese demand for nylon chips outstrips supply, Li Peng could even contemplate increasing its nylon chip capacity and in the process try to replace German chemical giant BASF as the largest nylon chip manufacturer in the world.

The other group company Lealea Enterprise Co, on the other hand would need to struggle considering that China is the biggest producer of polyester and would be very difficult to beat Chinese manufacturers in a sector, which has a very low entry threshold.

The biggest challenge comes from Chinese textile manufacturers who could invade the Taiwanese textile raw material market on the strength of their competitive costs; on the other hand Chinese textile sector could also be facing the same end of the stick.

Fibre2fashion News Desk - India


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