Emerging Markets Create More Demand for Cotton
March 10, 2009 Vietnam
The current growth of Vietnam’s textile and garment industries remains strong and should continue as favorable conditions develop in the market. The country’s recent accession to the World Trade Organization opens doors for trade relationships that will help Vietnam import raw cotton for spinning and garment production, while aiding the country’s growing exports of finished goods in the textile and garment sectors. Before Vietnam’s accession, Trade Minister Truong Dinh Tuyen said his country hoped to accomplish two major goals with membership in the WTO: to be treated equally in global trade and to get quotas removed from its textile and garment exports. While the impact of WTO membership should be apparent in 2007 and in the future, Vietnam’s textile and garment market already has seen major growth in recent years.
According to Nguyen Duc Thanh, Chief of Textile Apparel Administration Committee for Vietnam’s Ministry of Trade, Vietnam’s 2006 textile apparel export turnover was estimated at more than $5.8 billion (USD), a 22% increase from 2005. Exports to the U.S. market gained about $2.2 billion, increased by approximately 25% from the previous year.
Another indication of strong growth is Vietnam’s domestic consumption of cotton. In the last five years, domestic consumption rose 83%, from 450,000 bales in 2002/03 to more than 825,000 bales in 2006/2007. During that time, Vietnam’s cotton production remained stable around 50,000 bales, demonstrating the country’s infrastructure is prepared to import more cotton effectively.
Cotton and textile associations are positioning themselves for growth and promotion as well. The Vietnam Textile & Apparel Association (Vitas) and Vietnam National Textile and Garment Group (Vinatex) will co-sponsor the Vietnam Fashion Fair 2007 at the Ho Chi Minh City International Exhibition & Convention on June 6, 2007. The fair and exhibition will give international customers an in-depth look at the products and services of Vitas and Vinatex members, and provide an opportunity to further business relationships with Vietnamese companies.
Thailand
Cotton yarn and textile exports from Thailand experienced some downturns in 2006, but the overall market remained stable and could rebound in 2007. During the final quarter of 2006, cotton yarn exports were down at least 15% from their year-on-year average. Exports to Asian countries experienced the greatest declines. Cotton yarn exports to Hong Kong were down as much as 70%, with exports to China and Japan down 38%.
Lower cotton imports in early 2006 possibly played a role in the end-of-year shortfall. In March 2006, raw cotton imports from the United States – the largest cotton exporter to Thailand – fell 46.2% to around 50,597 bales. Cotton imports from Australia and Africa were down as well in the early months of 2006. Although this slowdown of imports in early 2006 could have some impact on the export numbers later in 2006, other factors indicate Thailand should remain resilient in 2007.
First, India’s position as the fastest growing cotton producing country in the world could have an impact on Thailand’s cotton imports. In 2006, Indian exports to Thailand rose; that should continue in 2007 as India could overtake the United States as the second largest cotton producer in the world. In 2006, the United States produced 21.7 million bales, while India harvested about 21 million bales. As India makes a push to produce more cotton, Thailand could reap the benefits in price and supply.
Another indication of Thailand’s solid position in the cotton textile and garment market is its stable and growing domestic consumption. Since 2001/02, Thailand’s domestic consumption has ranged from 1.825 million bales to 2.125 million bales. For the last three years, domestic consumption has been above the 2 million bale mark.
Peru
Peru’s economy has shown strong growth over the past five years, aided by several market-based economic reforms and privatizations in the 1990s, and accelerated by government measures since 2001 to promote trade and attract investment from foreign companies.
The country’s GDP has shown steady growth, improving by between 4% and 5% each year from 2002 to 2005. President Alan Garcia, who won re-election last year by a small margin, should continue to push for policies that grow the country’s economy.
The country is both a notable producer of cotton and an increasingly important consumer. Production in the country specializes in high-quality Pima that the local industry is fine-tuning to compete with Egyptian cotton. With a 3,000-year-old textile tradition dating back to the Incas, Peruvian cotton continues to gain respect in world markets. Peruvian Pima cotton is getting a strong push by Peru’s cotton industry to be positioned as a top-shelf designer fiber; the latest effort was a splash made at the highly renowned fashion show Le Salon Pret à Porter in Paris, France last year. Total Peruvian cotton production is estimated to reach around 280,000 480-pound bales in 2006/07.
On the consumption side, Peru’s spinning industry also showed signs of picking up steam last year. In late summer, spinners began stocking up their reserves, resulting in a sudden surge of imports in August. While some of Peru’s textile industry relies on high-quality fibers, many items of apparel (including cotton for shoes, which have been growing in importance in the country) rely on less expensive imported cotton types. Peru’s total imports for the January-August 2006 period reached over 132,000 480-pound bales, with exports just under 11,800 bales.
To access Peru’s cotton industry, one of the best venues is the country’s national trade show of textile, apparel, footwear, accessories and jewelry, known as Peru Moda. Organized by PROMPEX, the Peruvian Export Promotion Agency, the event strives to promote the quality of Peruvian natural fibers like Pima and Tanguis cotton, as well as finished textiles, footwear and accessories. PROMPEX expects to draw more than 300 Peruvian export companies and more than 500 representatives from the U.S., the E.U., Latin America and Asia.
Indonesia
Indonesia’s textile industry is projected to grow by 7.5% in 2007, compared to last year’s growth of less than 2%, according to the country’s government estimates. The high growth reflects an expected increase in demand from the U.S. and the E.U., particularly as U.S. production slows to take advantage of high corn and soybean prices and demand from the country’s biofuels industry to increase corn and soybean acreages. Ansari Bukhari, the director general of metal, machinery, textile and multifarious industries, said he is optimistic that target will be achieved.
The Indonesian Textile Association (API) predicts that the country’s exports of textiles and garments were around $8.35 billion (USD) in 2006, up from an estimated $7.5 billion in 2005. The country consistently consumes over 2 million 480-pound bales per year, with much of the consumption feeding the nation’s apparel industry.
With the Asean free trade area (AFTA) scheme coming into place, API has said it is “optimistic” that the country’s goals will be reached, if not eclipsed. Exports are expected to rise to $14 billion in 2010 when the free trade area expands under the Asia Pacific Economic Cooperation (APEC) agreement, API chairman Benny Sutrisno said. That target includes $8 billion from garment exports, $3 billion from spun yarn exports and another $3 billion from the exports of woven and knitted fabric and finished wear.
Indonesia, which holds 1.6% of the world textile market and 1.7% of the world garment market, according to API, exports its products to more than 200 countries worldwide. It now ranks 11th in textile exports and 9th in garment exports. In 2006, textile exports contributed almost 25% of total foreign exchange earnings in Indonesia, second only to mining.
However, there are challenges to the growth of Indonesia’s textile industry. The U.S. has requested that Indonesian textile and garment makers pay more attention to issues of corporate social responsibility such as workers’ welfare and conservation if they wanted access to the U.S. market.
Indonesia’s Minister of Trade Mari E. Pangestu said that “the U.S. has asked Indonesian textile producers to implement a more ‘socially responsible’ manufacturing process,” and added the U.S. challenge includes that the U.S. be allowed to conduct its own “social audit” of Indonesia’s textile factories to ensure that the industry is not using child labor or unreasonably unsafe working conditions.
The U.S. market accounts for close to one-third of Indonesia’s textile exports and an estimated 42% of its total textile earnings.
Another problem facing the textile industry is aging machinery. About 60% of the machines used in the Indonesian textile industry are between 10 and 20 years old, and more than a third are over 20 years old.
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