Bottlenecks make the textile industry change colors for winter

With an eye on the production of clothing for the winter, businesswoman Marla Tassiana sought, in December, a distributor of threads that would be used for knitting items. She couldn’t buy.

The orders were closed in December and the distributor should only reopen the agenda in May, practically making production for the cold season unfeasible. Daily, Tassiana contacts the supplier in anticipation of better news.

“My production is fast, because it’s not big, but if I receive it in May, I’ll be able to produce for the end of July. I’m not very optimistic”, he says. Plans for winter will have to change.

The difficulties of the textile industry, as in other sectors, have deepened with the pandemic and persist, affecting more intensely the small ones, who have less room to stock fabric and are at a disadvantage in the supplier queue.

Marcelo Zafra, a partner at Volk Uniformes, says that planning fabric purchases has become an exercise in guessing demand. Orders that used to take five days to be delivered can now take up to two months and are limited by accounts defined by suppliers.

To avoid unforeseen circumstances, the solution was to increase the stock of rolls in the factory and manage the higher costs. Since last year, prices have been updated seven times, two of which in 2022. In the pre-pandemic, says the businessman, the industry made a maximum of two annual readjustments.

Another element of pressure on the textile chain is the price of cotton. On February 11, the pound plume, the standard market measure, cost R$7.0261 in negotiations with an eight-day payment term. A year earlier, it cost R$4.7434, and on the same date, in 2020, it was R$2.8483.

According to Cepea (Center for Advanced Studies in Applied Economics), the high prices have been sustained by the low supply of products for immediate negotiation (the so-called spot market) and the external appreciation, which improves the conditions for exports.

Researchers said, in a bulletin on the 9th, that buyers have resisted closing deals with higher values ​​”in view of the difficulty in passing on readjustments from raw materials to manufactured products.”

The cotton price effect also affects the lines. Zafra, from Volk, says he paid R$80 for the embroidery thread cone. Today, it costs R$ 200. The common thread and topstitching (the one that is visible on the piece) went from R$ 1 per cone to R$ 3.50.

The executive calculates that, on average, the fabrics are 40% more expensive since March 2020, which led him to also adjust the final price of the pieces, which doubled. “Customers are scared and think I’m increasing profit or taking advantage of myself,” he says.

“We have even used an open proposal to negotiate, in which I show all the production costs so that the client understands that my margin has not changed.”

Part of the new problems in this chain is also related to Chinese industrial guidelines, which take products considered polluting in full.

At the end of September, 161 textile and dyeing factories in the Zhejiang region, where about 30% of China’s textile industry operates, were forced to halt production. According to the Caixin agency, the order was suspended after a few days, but the pressure to reduce energy consumption continues.

The effect of these measures on Brazilian production comes through synthetic fabrics, such as viscose, polyester and elastane. The price of the latter has gone up four times in one year.

Yoni Stern, executive director of Focus Têxtil, says that Chinese factories began to renegotiate, in October and November, negotiations of orders closed in July and August and with advances already paid.

They claimed, he says, that if minimum prices did not rise by 10 to 20 cents (in dollars), the dry cleaners would cancel shipments. There was still the pressure of the traditional pause in production and negotiations during the Lunar New Year celebrations, which begins in mid-January and runs through early February.

The Brazilian company decided to keep the purchases, even with a higher cost. “These goods are about to arrive and will arrive much more expensive. It will be difficult for the sector to pass on, especially in the popular market”, he says.

For Volk, which produces uniforms, the supply of dark colors has practically disappeared, for the same reason. Factories are struggling to buy dyes, mostly produced in China and India. Overall, says Zafra, fabrics in black, navy blue and royal blue, and dark green are lacking.

The rotation of colors and types of fabrics is not uncommon in the clothing industry, but the extension of the pandemic has also reached basic items and reduced the regularity of supply. A blue available today may disappear from stock tomorrow and not come back. The purple out of stock this week could end up being different from what’s in stock next month.

Marla Tassiana, from Libe, says that she started to prioritize in planning what suppliers have for prompt delivery. “We didn’t have a pair of pants in stock for three months, because we couldn’t buy undyed natural linen. In five years, it was the first time we didn’t have them.”

The large networks have not escaped the problems, but they have greater absorption capacity. The pool of pieces and the rotation of collections, typical of fast fashion, further dampen demobilization.

Consumption still weakened also helps not to run out of product. Edmundo Lima, executive director of Abvtex (Brazilian Association of Textile Retail), says that disorganization has required more replanning from retailers. The entity represents the main chains, such as Renner, Marisa and Pernambucanas.

“Companies need strong inventory management because it demands a lot of working capital and the consumer is not responding,” he says. According to the Executive, the 10% rise in prices until December was the peak of the elevation and should not advance.

“We feel that the consumer does not support any new transfer of prices, so the chain will have to find alternatives”, he says. In addition to higher prices for cotton, synthetic fibers and trim, the profile for the year is also seen as unfavorable, with elections and the World Cup at the end of the year, traditionally a period of good business for the sector.

For Fernando Pimentel, from Abit (Brazilian Textile Industry Association), the combination of pressures leaves the textile industry at risk due to the impossibility of passing on prices. The rise in cotton caused the cost of spinning to go from 50% of the cost, on average, to around 70%.