Butterfly Effect of Russia Ukraine conflict and Turkey’s garment industry suffered a serious setback
Since the international sanctions, the devaluation of the ruble, the closure of the international payment system to Russia and other events have continued to ferment, and the garment industry has also been in trouble. Among Turkey’s 24 clothing brands in Ukraine, 267 stores and 180 sales points have been closed. Among the 32 brands in normal operation in Russia, 655 stores and 2556 sales points are on the sidelines, with the risk of closure at any time.
The president of the Mediterranean Association of garment and garment exporters (AKIB) said that at present, Ukraine has stopped transporting goods, while Russia can transport, but it will take a long time to wait at the border. Therefore, clothing orders are facing a large number of cancellations and transportation delays. The loss of Turkey’s clothing industry in Ukraine alone has reached 150-200 million US dollars, and even the clothing orders of neighboring countries Poland are being cancelled. According to the official data of Turkey’s garment industry, the export volume to Russia and Ukraine in 2021 was US $173 million and US $287 million respectively, and the target export volume to Russia and Ukraine in 2022 was more than US $1 billion and US $750 million respectively.
Energy turbulence has burned into the cotton textile field cotton prices in India rose 6% in just 20 days
At the same time, the tense situation in Russia and Ukraine has exacerbated the turbulence in the energy field, resulting in a significant rise in crude oil prices, driving commodity prices to a certain extent, which has a great impact on consumer psychology and purchasing power. In the future, if the US dollar continues to strengthen, the price of imported goods in the United States may rise further.
At present, the operation pattern of the global cotton industry is tight, and the uncertainty and volatility of the operation of the industry may increase due to the variable demand landing and the rise of peripheral energy prices. Russia and Ukraine are the main producers of wheat crops, and their price rise will have a great impact on market sentiment.
Specifically, according to the news in the cotton textile industry, an Indian textile company said that the Russian Ukrainian battlefield had greatly affected its exports to EU countries and consumption in destination countries. In recent months, cotton prices have been rising all the way. Around February, the actual transaction price of Indian mcu-5 (about 32mm long) cotton rose from 78000 to 83000 rupees / Kandi, an increase of about 6% in just 20 days.
Blocked textile export and increased risk of abandonment by buyers
On the other hand, natural gas prices continued to rise, and the RMB exchange rate against the US dollar approached the 6.3 mark. For textile traders, the exchange rate of the customer’s country plummeted and the cost of customer import soared; With the appreciation of China’s RMB, the profit of our export will be reduced, and the textile export is expected to be more blocked. In addition, bulk textile raw materials are bound to change dramatically with the evolution of the situation in Russia and Ukraine, and further affect the textile industry.
At the same time, the war has affected shipping services and exacerbated the tension of international shipping. At present, the Black Sea and subsonic sea areas of Ukraine and Russia have been added to high-risk areas. The ports in these waters are the main export hubs of transactions. Once they face the blockade, they will have a significant impact on trade. Under the letter of credit transaction, there may be the phenomenon that the documents cannot be sent to the bank and cannot be negotiated. Under the non letter of credit payment method, the telegraphic release of the bill of lading will further lead to the rejection of the goods, it is difficult to return or resell the goods after entering the customs, and the risk of abandonment by the buyer will increase.
According to incomplete statistics, in the past month, more than 60 kinds of chemical raw materials have soared, and the ton price has increased by 10000 yuan, which has become the norm, with a maximum increase of 145000 yuan / ton. The escalation of geopolitical conflicts is naturally one of the reasons for “detonating” the industrial chain. As the situation in Eastern Europe heats up, the prices of natural gas and electricity soar again, crude oil soars to an eight-year high, and the prices of energy driven products rise. Anxiety about the energy crisis is also increasing.
For middle and downstream enterprises, the increase of raw material cost, labor cost, freight, miscellaneous expenses, labor cost and other operating costs will become a heavy burden one after another, squeezing the profits of textile workers.
