The average price of US clothing imports has fallen to its lowest level in more than 20 years, according to a new report.
At $2.96/sq m equivalent (sme) in 2009, the price was 6.1% down on the previous year and 21% lower than the average price of about $3.75/sme which prevailed for much of the 1990s, said Issue 144 of Textile Outlook International from Textiles Intelligence.
The fall will have serious consequences for apparel suppliers in the US and abroad who are struggling against ever diminishing margins, said the report.
One of its main causes was the elimination of safeguard restrictions on imports from China at the end of 2008. Once supplies were no longer constrained, imports from China surged in volume by 10.7% even though the US was in recession, according to the report.
However, the surge was achieved by slashing prices - at least in the categories which had been subject to restrictions during 2006-08.
In the case of men’s and boys’ cotton knitted shirts, the average price of imports from China is said to have plunged by 25% in 2009 alone. In two other categories - men’s and boys’ cotton trousers and women’s and girls’ cotton trousers - it dropped by 20%. Imports of women’s and girls’ cotton knitted shirts, meanwhile, fell in price by 18%,
The fall in Chinese prices forced other suppliers to follow suit - including those in Vietnam. In fact Vietnamese clothing prices dropped for the first time since 2000 which serves to indicate the pressure that Vietnamese producers are under.
At $3.14/sme, the average price of clothing imports from Vietnam was at its lowest level since 2002. Furthermore, the drop was in sharp contrast to increases between 2000 and 2008 which saw Vietnamese clothing prices more than double, from $1.58/sme to $3.42/sme, said the report.
The surge in imports from China and the fall in Chinese prices have had a severe knock-on effect on US suppliers closer to home. US clothing imports from Mexico and Honduras, for example, fell at double digit rates in 2009 - in both value and volume terms, according to the report.
Furthermore, the decline in clothing imports from Mexico and Honduras has hit the US textile industry. This is because a large portion of imports from Central American and Caribbean Basin countries are made from US yarns and fabrics whereas imports from Asian countries have little or no US content, explained the report.
Not surprisingly, these circumstances have had a detrimental effect on US production and, more specifically, on raw cotton usage. Indeed, the US Department of Agriculture (USDA) has predicted that the amount of raw cotton used by US textile mills in the 2009/10 cotton season will fall to its lowest level in 115 years, said the report.
The US industry is said to be hopeful, however, that production will recover as the US economy emerges from recession. Furthermore, there are signs that the surge in imports from China may be coming to an end as traders look to other sources. For example, Li and Fung - a major sourcing group based in Hong Kong - is planning to reduce its dependence on China by shifting some of its sourcing to other countries, said the report.
Li & Fung’s decision is said to have been prompted by rising costs and labour shortages in China as orders pick up and production recovers. It has also been prompted by the possibility that the yuan will be revalued in response to mounting pressure from the US government. On top, there is growing protectionist sentiment in the US which could lead to further restrictions on trade with China, according to the report.
But there are few signs that buyers will step up their purchases from the US or even from Latin America. Instead, they will shift to countries such as Vietnam and Bangladesh which can supply large volumes at rock bottom prices, predicted the report.
