Shanghai Intertextile Wraps as Cost Pressures Continue
Posted on September 1, 2010 by
SHANGHAI, China-The Intertextile Show wrapped up here last week with high hopes for the continued growth of the Chinese domestic market but growing concerns about ongoing pressure on costs.
Some 1,000 exhibitors, primarily from China and split fairly evenly between producers of finished goods and fabric suppliers, reported generally good traffic and activity. Final attendance numbers have not been released yet and while show-goers were overwhelmingly local, some Europeans and Americans were on hand.
Regardless of where the exhibitors and attendees were from, a prime topic was the cost of the products being shown. Currency exchange rates, increased shipping costs and supply pressure from an ever-expanding Chinese market are all impacting prices.
But it was raw material costs that were getting the most attention. A year-long surge in cotton prices was being further exasperated by the devastating flooding in Pakistan.
While the human toll was understandably the most severe, Pakistan's cotton-growing regions were feeling the impact of the monsoons and there was great concern that cotton prices, which had begun to level off, would start to rise again as supply diminished.
"We think cotton prices could go up in the 10 to 15 percent range because of the flooding in Pakistan," said Irfan Ahmed, chief executive officer of WestPoint Indus, the Lahore-based joint venture with WestPoint Home. "But until the water recedes, we really won't know."
"I think we will see cotton go a little higher, maybe 10 percent," said a representative who wished not to be identified for Loftex, the big Chinese towel producer that has a strong U.S. presence. "But we do see cotton prices stabilizing."
Henry Sui of Sunvim, considered the largest Chinese home textiles producer, was less worried about cotton but nonetheless acknowledged price pressures. "We don't think prices will go up anymore this year but we have seen increases because of the yuan," the Chinese currency that has increased in value versus the dollar over the past year.
Neil Lee of Mercury, another big Chinese supplier, said the show was a good one, particularly for the higher end products the company sells domestically. "The Chinese people can pay for it." The company sells to over 2,000 specialty stores in China, he said, and had a 20 percent increase in business over the past year.
WestPoint, which was showing for the first time along with its Pakistani partner, also felt the show was a good one. "We had no expectations coming here," said Alan Kennedy, senior vice president for the company. "But we met with over 200 customers, all Chinese, and if we can do business with 10 or 12 of them we'll be pleased with the results."
Kennedy said this market and the one in Russia where it was going to be exhibiting later this month, were going to be slow builds, "three to five years, but we expect to be getting 20 to 25 percent of our business" from these markets.
Like his counterparts at Chinese suppliers at the show, Kennedy is looking for China to be the big growth market for years to come.