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Fashion Alert: What’s in Store for Raw Material Costs, Demand and Supply

Apparel supply chains are feeling the pinch of rising prices. Increasing input costs mean more expensive yarns, textiles and garments.

Sourcing Journal’s new Raw Materials Outlook Report looks at the macroeconomic factors that are shaping pricing and the raw material market at large. Recently, supply has been hampered or slowed by the Russia-Ukraine conflict and the ongoing shipping crisis.

“Whether we will see a broader albeit slower economic growth in the future will depend very much on whether disrupted global supply chains will be rebalanced and how the Russian war in Ukraine will develop in the coming months,” said the International Textile Manufacturers Federation (ITMF).

Across the board, the U.S. Bureau of Labor Statistics Producer Price Index (PPI)—which measures selling prices for U.S. producers’ materials—has been trending up over the last year.

The price of cotton has risen almost 70 percent in past 12 months, per U.S. Department of Agriculture data. As of the end of May, spot cotton prices were $1.45 per pound on average, compared to 84.03 cents a year prior. The last time average weekly prices were this high was in June 2011.

Per the PPI, prices for synthetic fibers grew 12 percent year-over-year in April, unadjusted. Synthetics are seeing strong demand, but input costs have been impacted by rising crude oil prices tied to the war in Ukraine. Also driving up material prices are supply chain challenges and heftier shipping costs.

Wool, on the other hand, has seen fairly level prices. This year is expected to bring a slight increase in the number of sheep shorn compared to last year, but production is still low.

Wood-based fibers have also been more stable in price compared to other inputs, despite supply chain issues, as well as impacts from the energy market.

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A survey by the ITMF showed that on average, executives said they could pass only 40 percent of cost increases on to consumers. The pricing pain is also not being felt equally. Upstream suppliers like fiber producers and spinners are faring better than downstream manufacturers such as mills and cut and sew factories. In response to climbing cotton expenses, garment manufacturers in India’s Tamil Nadu went on strike, issuing a “cry for help.”

Supply and cost constraints are an issue now, but companies must also watch for demand shifts. In a Cotton Incorporated economic report, the company’s senior economist Jon Devine noted that orders from China had decreased for a few months, and inflation could reduce shoppers’ purchases of apparel and home goods. “When and if prices turn lower, inventory could evolve into a liability,” wrote Devine. “Depending on the depth of any potential reversal, cancelations and financial loss could result.”

Lower impact inputs

Although input costs are climbing, sustainability hasn’t been put on the back burner.

Only 1 percent of the cotton produced globally in the 2019-20 crop year was organic, but interest in organic cotton is growing. Last year, Global Organic Textile Standard (GOTS) reported a 19 percent increase in certified facilities.

Amid inflated petroleum prices, recycled polyester is also on the rise. For synthetic fiber manufacturer Unifi, the share of sales from its recycled Repreve fiber grew from 34 to 36 percent between the third quarter of the 2021 fiscal year and Q3 in 2022.

Brands are also leaning into alternative fibers as a means to combat rising costs. For instance, Infinited Fiber Company’s Infinna has launched partnerships with PVH-owned brands like Tommy Hilfiger and Calvin Klein. Infinna is a cellulosic fiber made from waste and can be used similarly to cotton in products such as denim and jersey materials.

Lenzing’s cellulosic Tencel fibers have recently been a less expensive option than cotton, reversing traditional pricing trends. The material brand is helping its brand partners promote the enhanced value in its fibers.

“While the market for textile raw materials remains volatile due to high input costs, supply chain disturbances and uncertain political and economic circumstances, there is an unbroken demand for sustainable fibers, like our Tencel lyocell fibers,” Johannes Stefan, commercial director for Europe, the Americas and Turkey at Lenzing, said in the report. “More than once, our partners were positively surprised about the fact that the most sustainable fibers don’t have to be the most expensive ones.”

Raw Materials Outlook

Download the Raw Materials Outlook report for more on how the industry is coping with cost increases and what to expect in supply, demand and pricing. Click here to get your copy.