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Depreciating Euro brings margins under pressure

01
Jun '10
The value-added textile industry in China is a state of disarray, because the Euro exchange rate continues to fall and has brought enormous impact on the sector in the country.

An owner of a knitting enterprise says that, the Euro exchange rate has been in downward spiral since March this year. The Euro exchange rate against the RMB was 1:10 by the end of April and now it is 1:8.4.

Although the company still has several hundred employees working in the workshop who are working on orders to be delivered in June, but the company does not know whether these orders can make money or not.

He said, the company took a pajamas order worth of 200,000 euros in March this year, with delivery time within 3 months. But after that, the Euro exchange rate against the RBM started on a downward trend.

When the order was taken a small profit margin of 10 Yuan per pajamas was taken in to account. But now the falling Euro rate has put the profit margins under pressure and under the current exchange rate margins have slipped to just around 3 Yuan per piece.

Zheng Mingmei, head of an apparel trade association in Qingdao city said, small and medium textile firms have an average profit of less than 10 percent, but the Euro has depreciated by 14 -15 percent, which wipes out the profit margins.

Fibre2fashion News Desk - China


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