Month: March 2022

The Shifts in US Textile Manufacturing Raise Questions About the Availability of US-made Textile Inputs for the Western Hemisphere Apparel Supply Chain

The full study is available here (need Just-Style subscription)

By leveraging production and trade statistics from government databases, we examined the critical trends of US textile manufacturing and supply. Particularly, we try to understand the strengths and weaknesses of the United States as a textile raw material supplier for domestic garment manufacturers and those in the Western Hemisphere. Below are the key findings:

First, fiber, yarn, and thread manufacturing is a long-time strength in the US, whereas fabric production is much smaller in scale. Specifically, fiber, yarn, and thread (NAICS 31311) accounted for nearly 18% of US textile mills’ total output in 2019. In comparison, less than 13% of the production went to woven fabrics (NAICS 31321) and only about 5% for knit fabrics (NAICS 31324).

Second, the US textile industry shifts to make more technical textiles and less apparel-related yarns, fabrics, and other raw materials. Data shows that from 2015 to 2019, the value of US fiber, yarn, and thread manufacturing (NAICS code 31311) dropped by as much as 16.8 percent. Likewise, US broadwoven fabric manufacturing (NAICS code 31321) and knit fabric (NAICS code 31324) decreased by 2.0 percent and 2.7 percent over the same period. Labor cost, material cost, and capital expenditure are critical factors behind the structural shift of US textile manufacturing.

Third, the structural change of US textile manufacturing directly affects the role of the US serving as a textile supplier for domestic apparel producers and those in the Western Hemisphere.

On the one hand, the US remains a critical yarns and threads supplier in the Western Hemisphere. For example, from 2010 to 2019, the value of US fibers, yarn and threads exports (NAICS31311) increased by 25%, much higher than other textile categories. Likewise, in 2021, fibers, yarns, and threads accounted for about 23.3% of US textile exports, higher than 21.0% in 2010. Additionally, nearly 40% of Mexico and CAFTA-DR members’ yarn imports in 2021 (SITC 651) still came from the US, the single largest source. This trend has stayed stable over the past decade.

On the other hand, the US couldn’t sufficiently supply fabrics and other textile accessories for garment producers in the Western Hemisphere, and the problem seems to worsen. Corresponding to the decline in manufacturing, US broadwoven fabric (NAICS 31321) and knit fabric (NAICS 31324) exports decreased substantially.

The US also plays a declining role as a fabric and textile accessories supplier for garment factories in the Western Hemisphere. Garment producers in Mexico and CAFTA-DR members had to source 60%-80% of woven fabrics and 75-82% of knit fabrics from non-US sources in 2021. Likewise, only 40% and 14.6% of Mexico and CAFTA-DR members’ textile accessories, such as labels and trims, came from the US in 2021.

Likewise, the limited US fabric supply affects the raw material sourcing of domestic apparel manufacturers. For example, according to the “Made in the USA” database managed by the Office of Textiles and Apparel (OTEXA), around 36% of US-based apparel mills explicitly say they use “imported material,” primarily fabrics.

The study’s findings echo some previous studies suggesting that textile raw material supply, especially fabrics and textile accessories, could be the single most significant bottleneck preventing more apparel “Made in the USA” and near-sourcing from the Western Hemisphere.

Meanwhile, how to overcome the bottleneck could trigger heated public policy debate. For example, US policymakers could encourage an expansion of domestic fabric and textile accessories manufacturing as one option. However, to make it happen takes time and requires substantial new investments. Also, economic factors may continue to favor technical textiles production over apparel-related fabrics in the US.

As an alternative, US policymakers could make it easier for garment producers in the Western Hemisphere to access their needed fabrics and textile accessories outside the US, such as improving the rules of origin flexibility in CAFTA-DR or USMCA. But this option is likely to face strong opposition from US yarn producers and be politically challenging to implement.

(About the authors: Dr Sheng Lu is an associate professor in fashion and apparel studies at the University of Delaware; Anna Matteson is a research assistant in fashion and apparel studies at the University of Delaware).

A New Strategy for the European Textiles and Apparel Industry – EURATEX perspective

Speaker: Dirk Vantyghem / Director General, European Apparel and Textile Confederation (EURATEX)

Topics covered

  • Macro-economic development of the EU textile and apparel industry
  • Impact of COVID-19 on the EU textile and apparel industry
  • The EU trade policy context
  • Key elements of EU textile and apparel industry’s post-COVID development strategy

Additional reading:

FASH455 Debate: Should US Fashion Companies Continue to Diversify their Apparel Sourcing Bases in 2022?

(The following comments are from students in FASH455 based on the readings)

Yes, US fashion companies should continue to diversify their apparel sourcing bases in 2022 because…

“It is said that you never keep all your eggs in one basket. If something happens in one of the countries that brands are sourcing from, whether it’s economically or politically, their business could be in jeopardy because they have no other sourcing bases anywhere else. As we see now with the Russian and Ukraine War, anything can happen at any time, and huge businesses like Mcdonalds and Starbucks have shut down their stores in Russia. Having connections in the business world is what takes a company further and makes them wealthier.

“The demand for sustainability and transparency is only rising from consumers and this is causing brands to need to take accountability and action for more ethical sourcing. In order for brands to find factories that will work with the stricter regulations and policies, it may require them to find different and new locations and countries to work with.”

“The pandemic proved to be detrimental to brands only sourcing from a few countries. Pandemic lockdowns and government restrictions were harmful to companies that did not have a diverse sourcing base… A diverse sourcing base will allow companies to have the ability to continue to source new products in case of government lockdowns in other sourcing nations.”

“I think that US fashion companies should continue to diversify their sourcing base in 2022 to benefit other developing countries who are looking to build their economy. The majority of apparel sourcing is done out of China and Vietnam. A diverse apparel sourcing base would be a great way to take the heat off of these countries and benefit others.”

“I think fashion companies should continue to diversify their sourcing bases because it can help them remain competitive while still keeping costs down. Keeping costs down can also help prevent giant unpredictable spikes. Lastly, the company will have more flexibility if they are diverse because they won’t be relying on a single source and won’t run into issues if that single source fails.”

“I understand the argument that it is easier for smaller companies to produce solely in China seeing as it can be seen as a one-stop-shop. I also understand why some companies are looking to bring their sourcing closer together and closer to home to mitigate some of the sourcing costs. However, I find this view to be short-sighted and will be detrimental to companies in the long run. As we saw with the pandemic, diversification is helpful in the wake of disaster. If one country is suffering from a natural, economic, or political disaster it would be helpful to have production capabilities in other countries. This way if production is shut down in one country, it is not as detrimental to obtaining products because you can lean on the factories in other countries. I personally would rather wait out the incredibly high costs, which will hopefully go down soon, and keep my sourcing base diversified to be better prepared for unforeseen challenges in the future.”

No, US fashion companies should consolidate their apparel sourcing bases in 2022 because…

 “US companies need to work on reducing the number of factories to increase sustainability and labor efforts. It would not be beneficial for the industry to continue to expand their sourcing bases, as that allows for less transparency with consumers. By diversifying their sourcing base they are proving to their consumers they only care about costs and how their clothing is affecting the environment.”

“I do not think US fashion companies should continue to diversify their sourcing base in 2022. These fashion companies should rather focus on nearshoring and local-to-local supply chain. Many retailers are interested in nearshoring as it helps eliminate the need to order months ahead, as the merchandise will have a shorter distance to travel. On top of this, many consumers want transparency and fast delivery. By sourcing more locally, fashion companies will be able to provide shorter shipping times as well as be more aware of sustainability in the supply chain and will then be able to relay the information to the consumers.”

“The very diverse sourcing base is exactly why some fashion companies struggled with supply chain disruptions and shipping delays. As the business environment remains highly uncertain, why not cut ties with some high-risk countries and only source products from the most secure and stable sourcing bases?”

“The present sourcing techniques used by US fashion corporations need to be refined and improved. The number of factories used for sourcing has to be reduced in order to improve sustainability and labor efforts. Increasing the number of sourcing bases does not benefit the industry since it reduces customer trust in the supply chain.”

“From trade data, it seems the top apparel suppliers to the US market barely changed—China, Vietnam, Bangladesh, Cambodia, Indonesia, or India. So, realistically, if a company intends to diversify sourcing, where else can they go?”

“During the pandemic, many US companies focused on strengthening their relationships with key vendors to gain a competitive advantage to achieve more flexibility in sourcing. It worked, then why companies should give up this strategy in 2022? Also, I think it would be wise for fashion companies to give MORE rewards to business partners that helped them survive the difficult times, rather than give sourcing orders to “new vendors”…further, using long-term loyalty and fiscal leverage with strategic business partners as an advantage could prove to be a good option for companies looking to obtain high production capacity, low prices, flexibility, and speed to market from their suppliers.”

Discussion questions:

Which side do you agree with or disagree with and why? What is your recommendation for US fashion companies regarding their apparel sourcing diversification strategies in 2022? Please join our online discussion and leave your comments.

[discussion is closed]

Russia-Ukraine War and the Apparel Sector: A Summary (Updated March 2022)

Like many other sectors, the apparel industry is NOT immune to the Russia-Ukraine military conflict. According to data from Euromonitor, as one of the world’s largest apparel consumption markets, apparel retail sales in Russia exceeded USD 28 billion in 2021.

Notably, many well-known global fashion brands, such as H&M, Zara, Uniqlo, Adidas, Hugo Boss, Nike, and the emerging ultra-fast fashion retailer Shein, are top players with the largest market shares in Russia’s apparel retail market.

Russia was a lucrative and growing market for luxury apparel brands. Industry sources indicate that of apparel items launched to the Russian retail market from Jan 2021 to Feb 2022, more than 19% were in the luxury segment, much higher than 10% in the US and 8.7% in Italy, France, German, the UK, and Spain combined.

That being said, store closure, the EU, and US’s export ban of luxury goods to Russia would modestly impact most luxury apparel brands. Notably, Russia remains a relatively small market for luxury apparel brands. For example, less than 2% of LVMH’s annual sales came from Russia and 3% for the Kering Group. In comparison, Western EU and North America combined typically account for half of a luxury apparel band’s annual sales.

Given the fast deterioration of the situation, a growing number of international fashion brands and retailers have decided to suspend their operations in Russia, including Nike, H&M, Puma, Zara, Levi’s, Hermes, Chanel, and Gucci. Japan’s Fast Retailing Group (Uniqlo) initially chose to stay, but later reversed its decision. According to Yale University, as of March 18, 2022, over 400 global companies have withdrawn from Russia, but some remain.

Further, the World Trade Organization data shows that Russia ranked as the world’s No.10 largest apparel importer in 2020 (by value). According to UNComtrade, China served as Russia’s single largest source of apparel in 2020 (40.3%), followed by EU members (12.3%), Bangladesh (10.5%), Turkey (6.2%), and Vietnam (5.1%). However, Russia accounted for a relatively small proportion of these countries’ apparel exports, implying a modest trade impact.

Nevertheless, a few Eastern EU countries rely more heavily on Russia as their top apparel export market, including Uzbekistan (52%), Moldova (40.4%), and Lithuania (18.8%). Apparel producers in these countries could be vulnerable to trade disruption.

On the other hand, the fashion industry faces growing price pressure because of the Russia-Ukraine war. As the immediate result of the escalated tension, the world oil price jumped substantially. This means textile fibers derived from oil, such as polyester, could face tremendous price pressure. As man-made fiber becomes more expensive, the demand for natural fiber could also increase, eventually extending the price inflation to natural fiber.

US Producer Price Index: Textile Products and Apparel: Polyester Fibers
Global Price of Cotton

Further, the vast uncertainty and risk caused by the war for the world economy and geopolitics could be a more significant concern. For example, a fluctuating financial market and a slower world economy would complicate the post-covid recovery. Also, Turkey, one of Ukraine’s close neighbors, serves as a leading apparel supplier for the EU market. Apparel companies that rely on sourcing from Turkey may need to prepare for a contingency plan. Media reports that the Turkish textile and apparel industry suffers as customers in Ukraine and Russia cancel orders.

Summarized by Sheng Lu

Additional resources: