Situation today: Price development, availability and freight
In the textile commodity markets, nothing is the way it used to be. Distortions occur in supply chains that make procurement unpredictable. Shifting production flows, inflation in our partner countries, a strong US dollar or scarce freight and unloading capacities make imports difficult. Despite the difficult situation, you can count on us!
Quo vadis?
Cotton has always been an important textile raw material, the procurement of which is impacted by crises, time and again. The last one was in 2010/2011, when the value of cotton rose almost every week and reached record prices, triggered by speculation on the commodity futures markets. After a few months the trouble was over, the market recovered - and we all hoped not to be confronted with such a situation ever again. But barely a decade later, the calm is over again. Only this time there are other factors involved!
Despite the general availability of fibres and yarns, factors such as high inflation in the producing countries, the parity of the EURO to the trading currency of our textiles - the US dollar -, intensive speculation on the commodity markets and the war in Ukraine make a reliable and above all long-term cost calculation impossible. Weather events such as drought or irregular monsoon rains also entail the risk of crop failures in cotton-producing countries. And finally, the availability of sea containers and incalculable loading and unloading capacities on land and at sea also make it difficult to import any goods.
Cibutex circular process
The vagaries of nature
With its worldwide spread, the Corona virus SARS-CoV19 has completely turned an internationally networked, optimally coordinated economic system upside down. Closed production facilities, recurring lockdowns and sealed-off ports have led to many months of shortages of raw materials, labour and production capacity and the textile products made from them. Fortunately, these times have been overcome to a certain extent. However, it is now becoming apparent that the gigantic textile industry in China still has major problems in its own supply chains. Therefore, other countries – including India and Pakistan – are now stepping in, which is why the production capacities there are only available to a very limited extent.
Economic conundrum
What is less encouraging is the high inflation in our sourcing countries. An import-dependent economy and the devaluation of the currency have led to a significant increase in wages in Pakistan, for example. In addition, credit instalments are becoming much more expensive and prices for everyday goods are skyrocketing. For people in developing countries, this situation is highly problematic, as hunger, homelessness and lack of health care weigh particularly heavily on people there.
Besides, the textile market in our most important sourcing countries is currently subject to enormous demand. The spinning mills there are fully booked for months to come because more and more Chinese companies are moving yarn production there. The high level of demand determines supply (and, therefore, prices). Moreover, delivery times are getting longer and the overall procurement situation is becoming increasingly unpredictable.
Fight for freight
Another unforeseen development we have had to deal with since the outbreak of the Corona pandemic is the shortage of transport capacity. Container ships cannot be unloaded in the world’s most important ports, which has created an enormous backlog. Accordingly, countless vessels are moored off Shanghai instead of sailing the world’s oceans. So, the freight supply is low, but the demand is huge. Following the laws of the market, not only have prices exploded, but a fierce battle for capacity has broken out. Transport times have increased significantly, and delivery reliability has decreased. Unfortunately, we are in this maelstrom and have been in fierce competition with other bidders for months. For this reason, we have long had to calculate our logistics costs on a daily basis.
But here is the good news: Thanks to the proximity to our production partners and our large warehouse, Dibella offers custom-fit solutions for the problems of our time. As a reliable partner of the textile rental service industry, we have adapted our procurement to the new requirements of the market at an early stage and develop customised solutions.
Please feel free to contact us on any kind of questions!