Centre for Trade Facilitation and Research in Textiles Textile Economic Intelligence (WEEK ENDING 01-07-16) NEWS HIGHLIGHTS Apparel export may fall 5% on global slowdown Brexit influence to impact Vietnam garment and textile exporters Cotton imports likely to remain near record high level as output decline China s textile industry facings impact of TTP trade pact
GLOBAL ECONOMIC INDICATORS a) Euro depreciated against Dollar by 0.67% from 0.894 on 1 st June 16 to 0.900 on 30 th June 16 and Japanese Yen appreciated against dollar by 5.94% from 109.23 per dollar on 1 st June 16 to 102.74 per dollar on 30 th June 16. b) The US stock market indicator Dow Jones closed up by 0.79% from 17789.67 on 1 st June 16 to 17929.99 on 30 th June 16. In Asian market, NIKKEI (Japanese market) has closed down by 8.14% from 16955.73 on 1 st June 16 to 15575.92 on 30 th June 16. SSE Composite went up by 0.53% from 2914.21 on 1 st June 16 to 2929.61 on 30 th June 16 and Hang sang went up by 0.16% from 20760.98 on 1 st June 16 to 20794.37 on 30 th June 16. c) Brent Crude oil price index decreased by 0.08% from 1 st June 16 to 30 th June 16. It decreased from $49.72 per barrel on 1 st June 16 to $49.68 per barrel on 30 th June 16. d) Cotlook A Index went up by 4.67%. It increased from 72.75 cents/pound as on 1 st June 16 and went up to 76.15 cents/pound on 30 th June 16.
INDIAN ECONOMIC INDICATORS EXCHANGE RATE: The Rupee depreciated by 0.39% from Rs. 67.35/$ on 1 st June 16 to Rs. 67.61/$ on 30 th June 16 weakening by Rs. 0.34. FINANCIAL MARKET TRENDS: The Sensex went up 285.79 points or 1.07% from 26713.93 on 1 st June 16 to 26999.72 on 30 th June 16. The Nifty went up by 107.8 points or 1.32% from 8179.95 on 1 st June 16 to 8287.75 on 30 th June 16. CHANGE IN FOREIGN EXCHANGE RESERVES: India s Foreign exchange reserves decreased by $2.67 bn. to reach $360.79 bn. on 24 th June 16 from $363.46 bn. on 3 rd June 16. INFLATION RATE FOR THE MONTH OF MAY 2016: The wholesale price index for the month of May 2016 was 0.79 percent as compared to 0.34 percent in April 2016. The consumer price index for the month of May 2016 reached 7.7 percent from 5.39 in April 2016. EXPORT IMPORT DATA FOR THE MONTH OF MAY 2016: According to the Official trade data, Exports decreased by 0.79% to $22.17 bn. in May 16 as compared to the corresponding month last year when it stood at $22.34 bn. Imports stood at $28.44 bn. down by 13.16% in May 16 as compared to the corresponding month last year when it was $32.75 bn. Period India s Export-Import in May 16 (in $ bn.) May 16 (Apr-May) 15-16 (Apr-Mar) 16-17 Total Export 22.17 44.4 42.74 Total Import 28.44 65.8 53.86 Trade Deficit 6.27 21.4 11.12
GLOBAL TEXTILE NEWS Brexit influence to impact Vietnam garment and textile exporters Brexit to definitely have impacts on Vietnam garment and textile exporters due to the devaluation of the pound and the euro, which influence prices as Vietnam s garment exports to the EU account for approximately 20 percent of the total volume with the UK contributing around 4 percent, Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (Vinatas), said. According to Giang, material prices will have to be re-negotiated due to changes in the exchange rate, which will have direct influence on enterprises from the fourth quarter this year, leading to the disruption of orders in 2017. The purchase power of British and European consumers will change as well. In addition, the Vietnam-European Union (EU) Free Trade Agreement is likely to be reconsidered, so how much influence Brexit will have on Vietnam remains unclear. In the short term, Brexit will have immediate impacts on the sector s production and sale as well as the jobs of Vietnamese workers, eventually influencing export growth rate to the EU this year. In order to limit the impacts caused by Brexit, enterprises who are exporting to the UK and EU markets need to place more focus on traditional markets like the United States, the Republic of Korea and Japan as well as trying to expand their share in new markets like Russia and Eastern Europe with new lines of products. Enterprises also need to build supply chains to make full use of signed free trade agreements and diversify products for both traditional and new markets. Besides, enterprises should take a cautionary approach when negotiating with the remaining importers in the EU to minimize the impacts from the UK s decision to leave the EU. As far as the government is concerned, the government needs to accelerate the process of signing trade agreements with the remaining members of the EU. The Government also needs to hold talks with the UK on differences between the Vietnam-UK FTA and the Vietnam-EU FTA, and promptly inform enterprises of the matter. Cotton imports likely to remain near record high level as output decline As erratic weather forces farmers in Pakistan, the world's fourth-biggest producer to trim area under the cotton crop, cotton imports are expected to remain near record-high levels in the year to July 2017, industry officials said. A supply crunch in Pakistan, at a time when back-to-back droughts have taken a toll on output at top producer India, could boost global cotton prices from their current near 11-month highs. The two countries have already taken turns this year to buy from each other to fill shortages at home. Despite the government and industry's efforts, farmers in top-producing Punjab have reduced area, cotton area in Pakistan is down around 15 percent, said Saleem Saleh, acting secretary general of All Pakistan Textile Mills Association (APTMA). Unpredictable weather, such as floods late last year as well as poor rainfall in recent months, and the resultant uncertainty about yields is putting many farmers off cotton, stymieing Pakistan's efforts to boost local output. While the country has set a production target of 14.1 million bales for the new season, output is likely to fall short and that rainfall over the next few weeks will be crucial in determining yields, industry official said. Saleem Saleh further added that as local consumption is rising but production is stagnant, import requirement is rising. This year imports jumped due to crop failure. Next year also imports would remain around this year's level. Actual number depends on production. Shahzad Ali Khan, chairman of Pakistan Cotton Ginner's Association said that the farmers are finding other crops more profitable to cotton. The country's cotton output dropped by a third to 9.7 million bales in 2015/16, forcing it to import a record 4 million bales in the year, up from 1.2 million a year ago, according to APTMA. Pakistan annually consumes around 15 million.
Even for the season starting August 1, weather has not been supportive and the crop in Punjab has already been hurt by poor rains in May and June, said Khan. Cotton sowing in Pakistan starts from April and harvesting begins in July. China s textile industry facings impact of TTP trade pact With the signing of the Trans Pacific Partnership trade agreement between 12 Pacific Rim countries which China is not a part, the textile industry of China is undergoing palpable change as many countries apart of the agreement threat a power shift in the world s textile industry. The Woolmark Company key account manager for Hong Kong, Daniel Chan said that despite the slowdown in Trans- Pacific Partnership by the United States presidential and congressional elections, the impact has already been felt by China as companies are trying to move out of China. With the elimination of tariffs set to promote the competitiveness of textile industry, Mr Chan said that the reaction had been immediate, bringing trade momentum from China to Vietnam. The profit margin is low now so manufacturers are trying to save money so when they talk about setting up factories in South East Asia, most were from China or Hong Kong and they have migrated production there. The Woolmark Company Hong Kong country manager Alex Lai, said that the manufacturing and processing of fibres is undergoing a revolution in Asia. Manufacturing is moving from China to South East Asia into Bangladesh, Vietnam, Cambodia, Burma and Indonesia because of labour costs and in the future the TPP tax benefits to export to Europe and US will be attractive. Big businesses in the supply chain are already building their businesses in TPP partner countries. The TPP is anticipated to set widespread new rules for trade, investment, intellectual property, labour, data storage, state-owned enterprises and the environment across 40 percent of the world's economy: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, US and Vietnam. According to the World Trade Organisation, the 12 TPP partners altogether imported $65 billion worth of textiles and $154 billion worth of apparel in 2013, which accounted for a world import share of 20 percent and 32 percent, respectively. India currently enjoys a 12.5 percent tariff preference in the EU under its GSP (generalised scheme of preferences) programme. But the export sop would now be impacted for textile shipments to the UK. Textile makers urge government to withdraw 3pc cotton import duty Pakistani textile manufacturers urged the government to withdraw three percent import duty on cotton to arrest the decline in the size of domestic cotton. All Pakistan Textile Mills Association (Aptma), ChairmanTariq Saud, Chairman said that the removal of duty was essential so as to make raw material available to the industry at competitive prices. Aptma Chairman also clarified that the concerns of the Karachi Cotton Association (KCA) and the Cotton Association of India with regard to the export of cotton were misplaced. In view of the failure of the cotton crop, the textile industry has imported over three million bales, and a significant portion has come from India. He urged the government to immediately order the release of cotton which has entered Pakistani territory. He reiterated that thousands of bales were stuck at the Wagah border, for which the mills have made payments. However, the government need to make some move to settle this issue. Aptma believes in free trade and underlined the importance of keeping this regime intact and free from all interferences as it was expected that Pakistan would continue to meet its requirements from import of cotton. Global yarn production increase by 20pc in first quarter of 2016
With increase in yarn output across Asia by 21 percent and South America by 29 percent, while it saw decreased by four percent in Europe but the global yarn production increased by 20 percent in the first quarter of 2016, compared to 4 percent growth rate in the first quarter of 2015, according to the latest report from the International Textile Manufacturers Federation (ITMF). However, global yarn stocks dropped in by five percent quarter-on-quarter. Yarn stocks reduced by six percent in Asia and one percent in South America, while they remained unchanged in the other regions. Year-on-year, global yarn stocks increased by nearly three percent. Global fabric production fell by over eight percent in the first quarter of 2016 compared to the previous quarter due to fall by over 10 percent and two percent in Asia and Europe, respectively. In South America, in contrast, fabric production increased by 31 percent. Compared to 2015, global fabric output remained unchanged, with output remaining stable in Asia, down nearly 21 percent in South America and up around nine percent in Europe. As per the ITMF report, worldwide fabric stocks increased moderately quarter-on-quarter. In South America, fabric inventories increased by over two percent while in Asia it reduced less than one percent during the three-month period. INDIAN TEXTILE NEWS Tirupur garment exporters pitch for separate trade pact with Britain A free trade agreement (FTA) is paramount to boost exports, including garment exports to the UK, said A. Sakthivel, the head of the Tirupur Exporters' Association. Although, the EU is a major destination for readymade garments, but the UK a leading market as Europe makes up 46 percent of apparel exports, of which Britain's share is 40 percent. Hence, garment and knitwear exporters in Tirupur are pitching for FTA with the EU, also want a separate trade pact with Britain after it voted to leave the EU. Ashok G. Rajani, chairman of the Apparel Export Promotion Council, said that Britain's exit would significantly dilute the relevance of the EU FTA for them. The only way to expand business in the UK after Brexit would be through bilateral talks, which would mean a fresh round of negotiations. However, Rajani said that the approval a Rs 6,000-crore special package for the textiles and apparel sectors and steps announced by the government would help textile exporters to enter China and Southeast Asia. The incentives would also enable exporters to price their products much better than countries such as Bangladesh and Vietnam, which had low labour costs. While Europe is an important market for them, it is more or less saturated and they have to work to enter China and Southeast Asia in the coming years, as there will be greater penetration for high-end products there.