Has the Textile Industry in Southeast and South Asia Recovered?
In recent years, global supply chains have faced significant changes due to shifts in the international economic landscape. To avoid trade frictions and embrace necessary transformations, some of China’s more replicable and replaceable mid-to-low-end industries have been gradually shifting to countries in Southeast and South Asia, where cost advantages are more prominent. As a result, the development of the textile industry in these regions has garnered increased attention. Over the past two years, key Southeast Asian countries have seen a rebound in orders and an improvement in production capacity. So, how much has the textile industry in South and Southeast Asia recovered?
1. Market Conditions in Major Textile Countries in Southeast and South Asia
Focusing on major textile-producing countries such as India and Vietnam, the spinning capacity in these regions saw fluctuations between 2020 and early 2022 due to the pandemic. In March to May 2022, as international cotton prices continued to rise, spinning operations in Vietnam and India began to decline. By September to October 2022, the situation started to stabilize with a slight rebound, and spinning operations gradually recovered throughout 2023. Export trends followed a similar pattern, with export volumes in major Southeast Asian textile countries decreasing from the first quarter of 2022, only to begin a gradual recovery in the fourth quarter of that year.
India:
In March 2022, India’s spinning capacity utilization started to drop, plummeting from around 90% to less than 50% by September 2022. A slight recovery followed, with capacity utilization reaching 75% by April 2023, though it has remained between 65% and 72% as of February 2024. Cotton yarn export volumes also mirrored this trend, falling from 122,800 tons in January 2022 to 26,200 tons in September 2022—a 78.66% decrease. Although exports slowly rebounded to 116,000 tons by August 2023, they fell below 90,000 tons by December 2023.
Vietnam:
In Vietnam, the capacity utilization of spinning companies fell from over 70% in May 2022 to less than 40% by October 2022. Gradual recovery followed, with utilization reaching 70% by May 2023, though it has fluctuated below 70% since then. Vietnam’s cotton yarn export volumes decreased from 164,300 tons in March 2022 to 110,100 tons in July of the same year. After hitting a low of 88,000 tons in January 2023, export volumes recovered to around 150,000-170,000 tons per month, aligning with the normal levels of the past three years.
Bangladesh:
Bangladesh, with its relatively low labor costs, has been a favored destination for many apparel brands, leading to rapid growth in its garment industry. In recent years, the country has seen a steady increase in garment export volumes, solidifying its position as the world’s second-largest garment exporter. In 2023, Bangladesh’s garment exports reached $47.386 billion, marking a 3.67% year-on-year increase and a doubling of export value since 2014. Despite a brief decline in 2020 due to the pandemic, Bangladesh has maintained positive growth, with garment export growth exceeding 25% in both 2021 and 2022. However, labor strikes in September-October 2023 negatively impacted exports, and while the minimum wage for garment workers was raised by 56%, dissatisfaction among some workers suggests that future increases in production costs may slow industry growth.
2. Analysis of Key Factors:
1. Raw Material Costs:
International cotton prices have significantly influenced the operational capacities of textile companies. For example, U.S. cotton prices began rising in March 2020, reaching 159 cents per pound in the first half of 2022 before sharply declining. This fluctuation led to cost pressures for Vietnamese spinning companies, forcing them to reduce operational capacity to control losses.
Similarly, Indian cotton prices surged due to low stock levels and slow new cotton arrivals in late 2021, with the S-6 cotton variety reaching a peak of 100,000 rupees per candy in 2022. The high cost of Indian cotton, the most expensive globally, reduced the competitiveness of Indian exports, leading to a nearly 80% decline in monthly cotton yarn exports. As cotton prices eased, spinning operations slowly recovered.
2. Demand Challenges:
The global economy has been hit by high inflation and tight monetary policies, leading to a sharp contraction in consumer demand in Europe and the United States. Apparel sales were particularly hard hit, with U.S. wholesale sales of clothing and fabrics declining throughout 2022. As a result, the volume of textile and apparel imports from Vietnam and India began to fall from the second quarter of 2022, impacting the operational rates of textile companies in these countries. In 2023, U.S. cumulative imports of cotton products decreased by 21.72%, while EU clothing imports fell by 16.22%, slowing the recovery of textile operations in Southeast Asia.
3. Fluctuations in China’s Cotton Price Differential:
The large disparity between domestic and international cotton prices in China in 2022 led to a significant decline in the country’s demand for imported yarn from India and Vietnam, severely impacting orders from these countries. While Vietnam’s cotton yarn imports began to drop by 45% from May 2022, China’s import volumes started to recover in 2023 as the price gap narrowed, and with the influence of the Xinjiang cotton ban, imports from Vietnam and India also began to increase.
Conclusion:
The textile industries in South and Southeast Asia continue to face challenges such as significant fluctuations in raw material prices and slow demand recovery. However, with improving global economic expectations, the nearing end of wholesale inventory reductions, and the strengthening of Southeast Asia’s textile competitiveness, the market share in these regions is likely to expand further.
