Market Insights – July 2024 –  Asia’s Fashion Hubs Navigate Turbulence of Supply Chain Challenges

The fashion production markets in Asia face challenges from high costs of raw materials, logistics disruptions, impacting exports. Vietnam’s exports remain resilient. Indonesia maintains steady growth. Overall, the Asia-Pacific textile and fashion market navigates supply chain constraints, inflationary pressures, and geopolitical tensions amid shifting production and trade dynamics.  

Bangladesh

Widespread protests erupted across Bangladesh over civil service job quotas, leading to riot and the train services, television news, telecommunications, and overseas calls were heavily disrupted due to internet and mobile connectivity shutdowns. 

70-80% of spinning mills are significantly impacted by a persistent gas shortage, reducing production capabilities by about 40%, leading to a 13% increase in yarn imports.  

Bangladesh’s GDP grew to 6.12% in the third quarter of FY 2023-24. Inflation decreased slightly to 9.72% in June, and the trade deficit expanded significantly to $18.69 billion in July-April 2023-24. 

China

China’s rail freight reached historic highs in June, with significant increases in container, automobile, and cold-chain cargo shipments. The China-Europe freight train service also saw a 15% year-on-year increase. Commodity prices saw mixed trends, with cotton, polyester staple fiber(PSF) benchmarks dipping and cotton yarn import prices remained steady.  

China’s GDP grew 5% YoY in the first half of 2024 to 61.68 trillion yuan, with the IMF raising China’s growth forecast for this year and next. Total goods trade reached a new high, with exports up 6.9% and imports up 5.2%. The consumer price index maintained positive growth for five straight months, while the producer price index saw the smallest decline in 17 months. 

China’s trade with ASEAN climbed 10.5% YoY, while trade with the EU dipped 0.7% and trade with the US rose 2.9%. China also released new ESG reporting standards targeting mandatory ISSB-aligned reporting by 2030. 

India 

Prices for polyester, viscose and polyester-cotton yarn in India have surged due to higher raw material costs and increased freight charges, despite limited downstream demand. Meanwhile, cotton sowing in key regions such as Punjab, Haryana and Rajasthan is expected to be 25% lower, and Indian cotton prices are 5-7% higher than international prices.

Exporters are facing port challenges, potentially delaying July shipments. Alternative route such as using air routes via Gulf countries were used due to tensions in the Red Sea. Cargo traffic at major Indian ports grew 6.8% year-on-year in June, though some ports saw declines. 

India’s GDP growth forecast for the current fiscal year remains at 6.8%, with high interest rates and lower fiscal stimulus tempering factors. Inflation decreased to 9.72% in June. India is enhancing trade relations, concluding an FTA with Oman and negotiating with Chile.  

Indonesia

Ports in Jakarta, Semarang, and Surabaya are operating normally with 60% container stock availability, though there are shortages of 40′ and 40’HC containers. Container rates to the U.S. East and West Coasts have increased by $950-$1,250 per 40′ container, with current rates at $10,950-$11,150 and $8,950-$9,250 respectively. Vessels are fully booked, causing lengthy delays. 

To mitigate costs and lead times, there is increasing usage and development of local trims.  Indonesia’s GDP growth forecast has been upgraded to an average of 5.1% for 2024-2026, with June inflation dropping to 2.51%. 

Exports rose to $22.33 billion in May 2024, while imports fell 8.83% YoY. Negotiations for the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU CEPA) are set to be finalized by July 2024 including tariff exemptions and measures to support SMEs and sustainable trade relations.

Vietnam

In Q2, workers’ average monthly income rose by 7% YoY to VND 7.5 million   The Vietnamese government approved a 6% increase in the regional monthly minimum wage effective July 1, 2024, raising the highest minimum wage to VND 4.96 million/month.  

The government proposed reducing corporate income tax for small and micro-sized enterprises to 15-17% and extended the VAT deduction from 10% to 8% until the end of 2024. Measures are being taken to assist businesses with rising sea freight costs, port congestion, and container shortages. 

Vietnam imported 766,000 tons of cotton worth $1.53 billion in H1 2024, a 21.6% rise in quantity and 9% in value YoY. GDP grew 6.42% in the first half of 2024, with CPI rising 4.08% and core inflation 2.75%. 

Textile and garment exports increased 3.1% to $16.3 billion, footwear exports grew 10% to $10.84 billion, and wood exports rose 22.2% to $7.42 billion.

To agilely manage these challenges, Asia’s fashion hubs shall consider working with supply chain finance platforms to mitigate risks for supply chain resilience, leverage digitalization, and adapt production optimization strategies to remain competitive in the evolving global market. 

Talk to Air8 for supply chain finance and insights: https://air8.io/contact