Inflation-induced economic stress and energy crisis are affecting the global textile sector.
There has been a change of guard in the United Kingdom with The Rt. Hon. Ms. Liz Truss, becoming the Prime Minister; direct impact on economic woes there, which resulted in the change in the party leadership.
Soaring energy and consumer product costs coupled with a reduction in disposable incomes in the United Kingdom and EU will impact the global textile industry. Additionally, the strengthening of the U.S. dollar will increase the price of gasoline paid by importing nations and will put pressure on the debt repayment of developing countries like Sri Lanka and Pakistan, which are major textile manufacturing countries.
The rising cost of living, energy crisis, inflationary pressures, ongoing Russia-Ukraine war, and mounting tensions between China and Taiwan are all contributing to the slowing of the textile sector.
“Yarn enquiry is not there,” stated Mr. Velmurugan Shanmugam, General Manager of Aruppukkottai, India-based Jayalakshmi Textiles, a cotton spinning mill that has 72,000 ring spindles. Mills are forcing additional weekly holidays or reducing production in states like Gujarat, Andhra Pradesh, and even in Tamil Nadu. “Our production has come down from 12 tons/day to 8 tons per day,” added Velmurugan Shanmugam.
While the issue surrounding high cotton and raw materials costs has occupied the textile industry for a few months now, it is important to focus on the demand aspects. The demand for textile products has slowed down due to global geopolitical and economic situations. This is evident from the ongoing crisis conditions in the United Kingdom and Sri Lanka.
As stated today by Ms. Liz Truss, the Prime Minister of the United Kingdom, the priority is to tackle the energy crisis so that cost of living raises can be controlled. Policies in the near short term must tackle energy costs and allied issues to have control of the economy. If uncontrolled, analysts predict that inflation may spiral up to 13.3% by Spring in the United Kingdom. Such a dire economic situation may affect the sales of textiles and other commodity items.
“Economic scenarios in Europe and elsewhere are affecting the textile industry in India. Even at Rupees 430/Kg for 60s Ne compact cotton yarns, there are not many takers. Mills incur a loss of Rupees 30-40/Kg at such prices,” agonized Velmurugan Shanmugam.
Textile and manufacturing sectors must adopt a new management paradigm, “Caveat Emptor et Venditor.” This indicates that both buyers and sellers must pay attention to global scenarios to have the situation under control. The industry should be cautious in its planning in terms of modernization and non-essential capital expenditure. In my opinion, it is worthwhile to postpone such activities for a period of at least 18 months.
The burden rests in the hands of policymakers and central bankers of nations to have a good grip on their economies to avoid recession. Recessionary pressures along with higher input costs will have dire consequences for the industry.
Care needs to be exercised by the stakeholders of the textile industry. Fall-2022 will be an interesting one to watch, which will set the course for the global textile and manufacturing industry for the next few years to come.
By Seshadri Ramkumar, Professor, Texas Tech University, USA, Website:https://www.entx.ttu.edu/dr.-s.s.-ramkumar.html