Chinese denim falling to keep up

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong’s re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China’s denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midrange and even high-end denim garments. These suppliers are spending more in R&D in arrange to expand more upscale products.

These things have also given many midsize companies to vertically integrate production and enhance production output. Many leading companies already carry out all production processes in -house. Doing so has offered these leading companies a little more space to metropolis-clothing captivate unforeseen additional costs, such as export taxes.

In projecting the growth in cotton products from China, one only requires to have a glance at the past. After the third stage of quota phase-out (January 1, 2002), U.S. imports of cotton products no-longer subject to quota climbed noticeably, due to largely to increasing shipments from China. From 2001 to 2004, the import volume (SMEs) of newly quota free cotton products increased 69.6%. Though, apart from China, world shipments actually decreased 8.4%, while Chinese shipments boosted by 483.9%. As the volume of Chinese imports increased so rapidly, the cost per SME for these categories decreased 45.9%, a turn down the rest of the world was incapable to compete. So, China’s contribution of world shipments of cotton products newly integrated into quota-free trading increased from 24% in 2001 to 53% in 2004. With China’s improved capacity for apparel production now there is a less motive not to anticipate likewise growth in Chinese shipments of products from which were lifted in January 2005.

The effect on cotton

The persistent discussion about US safeguard measures against Chinese cotton textile and apparel imports directly influences the market for cotton. With China as the world’s leading buyer of cotton and the United States as the biggest seller, any modify textile trade policy could have major implication on cotton. For the 2005/06 marketing year, the USDA estimates that China will import a record 15.0 million bales to fulfill internal mill demand for fiber. Usually, the United States calculated to 55% to 60% of China’s cotton purchases, noting that it possible could sell a record 7 to 8 million bales to China in the coming marketing year.

The volume of cotton products exported from Chinese mills would decline and hence new trade restrictions, the volume of cotton demand could likeĀ¬ wise decrease, perhaps giving an oversupply of cotton on the U.S. and world marĀ¬kets, which would put forward a depressed outlook for price.

Export tax forces quality upgrades, higher prices

China denim jean producers are increasing R&D facilities and enhancing production output to gain in competitive edge in the quota-free market. But, because of a new export tax imposed by the government in China, it is estimated that many suppliers will be increasing prices.

Exports in some apparel categories, covering denim jeans, are being taxed amounted to $0.02419 to $0.06049 per item per kilogram. China officials applied the export tariff to motivate suppliers to produce more upscale designs as an alternative of provided the market with low-priced, low value products.
The new levy is projected to drive production costs up 3 to 6 percent, but whether or not this added expense will be distributed to buyers according to the size of the supplier.

Though many leading companies can still offer to take up the extra cost, many small suppliers will have no option but to increase product prices in arrange to keep up profit margins.

The export tax is not going to disturb denim jean prices at Jiaxing Union Garments Co. Ltd, a bigger Hong Kong-invested company that produces for Lee. Considering of the impending tax months before it was applied; the Zhejiang province-based company was capable to refresh contracts with clients. Jiaxing Union will also be capable to take up the added cost in cases where the client did not need to renegotiate.

Many companies capable of bearing the additional cost normally are not raising prices for long-term clients. Though, their innovative designs will be provided to projections at a higher price.

But many small and midsize suppliers that had procured extra machinery to enhance production capacity and turn out to more competitive in the quota-free market will now have to reduce manufacturing costs to keep up operations. As the slight margins may not facilitate them to recover the amount invested in new equipment, many will have to increase prices, even for well built clients, to keep on buoyant.

Expansion and new set ups in China

Apart from the size, China denim jean suppliers are increasing R&D facilities to build up more upscale products and enhancing efficiency to reduce the costs. Suppliers, who already established that aims simply on high-volume production of inexpensive products, will evade competitiveness in the international market if they do not compose likewise changes. The foreseeable step of increasing prices to react to costs would make their low-end products unfavorable among buyers’ aspects for better-quality designs at only slightly soaring prices.

Many companies like Jiaxing Union and Jiaxing Roma Garment Co. Ltd, are concentrating on R&D on new fabric and fiber blends, superior washing and finishing technology and new ideas. Jiaxing Roma is putting their efforts in brand development, a progress the company glimpses as essential for gaining its goal of receiving huge share of the international market. The company exports nearly 100,000 denim jeans monthly to Japan and South Korea.

Vertically integrated production to increase out put and decrease cost are steps being implemented by China denim jean suppliers. Even before the export tax was applied, many suppliers had already set expansion plans in expectation of the raised orders and increased competition that quota elimination would bring. Furthermore, to procuring latest machinery, many companies are coming with new factories. In many cases, the developments will increase capacity by 50 percent. The extra factory space will be utilized not only to house more sewing machines but also to establish workshops for fabric weaving, washing, finishing and dyeing.

So, the export tax has made it critical for suppliers to gain by all these expansion plans. At present, Shunde Changrun Garment Co. Ltd carries out most washing and finishing processes in-house while subcontracting fabric weaving to local mills. To put together production, the company is setting up a weaving factory in Jiangmen, Guangdong province. The plant, projected to be function by in a short period, will house 50 rapiers with the capacity to weave 300,000 yards of denim fabric monthly.

Currently, Shanghai Gavin International Trading Co Ltd functions through subcontracting of fabric weaving and dyeing but intends to have the capability to conduct these processes in-house in short period. The company produces for Gap of the United States and exports more than 40,000 denim jeans monthly.

Apart from for fabric weaving, Zhuhai New Chengshin Clothing Co. Ltd does all processes in-house. The company has not intending to set up or acquire a fabric weaving mill in near future. As a substitute, it will be procuring new equipment for its existing facilities.

International Textile Group, Inc. (ITG) in mid 2005 declared that it will set a state-of-the-art denim plant in the city of Jiaxing, Zhejiang Province, China. The setup will be a joint venture partnership called Cone Denim (Jiaxing) Limited, 51% owned by a subsidiary of ITG (a WL Ross & Co. company) and 49% owned by a subsidiary of Novel Holdings Limited. Recently they signed a US$35m loan deal and a $15 million line of credit with Bank of China to help its new Chinese production plant. Making of 28 million yard production facility is underway and they suppose to be offering high quality denims to their customers by the first half of 2007.

Cone Denim (Jiaxing) facility will have a production capacity of nearly 30 million yards annually. A vertical operation, the plant will be established with the latest manufacturing equipment to process raw cotton through finished fabric.

Set up in 1891, Cone Denim has been a key supplier of denim to top denim apparel brands for over 100 years. Cone Denim maintains also functions in the United States, Mexico, Turkey and India, and has expansion plans under pipeline at Central America and China to offer broader service and flexibility to customers worldwide.

Novel Holdings, set up in 1964 is engaging in textiles, apparel and other trading businesses, it also covers yarn and knitwear and branded companies such as Michael Kors and Pepe. – Leading B2B Portal and Marketplace of Global Textile, Apparel and Fashion Industry offers Free Industry Articles, Textile Articles, Fashion Articles, Industry Reports, Technology Article, Case Studies, Textile Industry News Articles, Latest Fashion Trends, Textile Market Trends Reports and Global Industry Analysis.

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