Iran War To Hit Over 50 pc Of Textile Exports

Chennai: The Iran War is heavily impacting the textile industry in multiple ways. More than 50 per cent of the textile exports are hit as West Asia is a major market as well as a transit hub. Import of man-made fibre and rising prices remains a big concern, while the availability of labour in textile mills is also a major worry, finds Chandrima Chatterjee, Secretary General of Confederation of Indian Textile Industry.

Q) Let's just start with exports. Textiles are among the key goods exported to West Asia. How much does the region account for our total exports? What is the situation on the export front and how much percent of exports has been hit by the crisis?

The West Asia crisis has impacted as you correctly said in multiple ways. First as a destination for textile and apparel. It is the third largest destination for Indian textile and apparel and to that extent of course it is a big concern. It is not just a direct destination as a lot of goods move from there to other places as it is a major warehousing and re-exporting hub also. So obviously it has had an impact on the demand. Thirdly, of course, it is the route to the other major markets, the western markets. At least three-fourths of my exports will be directly or indirectly impacted by the West Asia crisis because all that is exported there or beyond to the Western markets is getting impacted.

Q) If you look at March itself, how much impact are you expecting?

Since we do not have the data, I will only be able to presume from the earlier proportions. So that region, directly and indirectly will be around three-fourth of my exports. Only thing is March is not one of the peak seasons and it is in between the earlier winter season and the next season is why the impact may not have been very severe. But of course, now that we are picking up both in terms of raw material sourcing for the exports as also exporting some of the intermediates, I think the impact from April is when we are seriously concerned. Also, because of the constraints in the sourcing of raw material from that point of view also the pinch is now getting harder.

Q) We were talking about the exports to West Asia, but we had a very tough time with the US. We had tariffs, reciprocal tariffs and also punitive tariffs. Very recently, both these tariffs have gone. How is the situation in exports to the US currently?

Unfortunately, because of the reciprocal tariffs we lost the peak period, which was still January, February. But we got the good news after that, and the industry was very optimistic. However, as we all know it was a very short window and immediately after that the West Asia crisis came. So, we have not been able to fully leverage on the removal of those reciprocal tariffs. However, now that we do not have any such disadvantage to the others, we of course, were looking at good times to come, but as of now we are not hearing of any tangible increase in demand there. For a lot of buyers, it is still a wait and watch mode.

Q) You mentioned about the sourcing of the material. Imports are also a big concern as crude oil availability is crucial for man-made fibres like polyester and viscose. How is the supply situation? Are the downstream industries facing a raw material crunch?

Prices have gone up. We saw some significant price increase, a bit of volatility. But what is the apprehension is that we have not seen the worst yet and we were still working on the reserves and things. So, the industry is very concerned.

One of the outcomes of this has been I was just hearing from one of the major suppliers of polyester fibre that the recycled fibre price which was earlier always more than the virgin fibre is now getting cheaper because that is produced in India and the virgin fibre has raw materials which are dependent on external sources. So, a lot of such dynamics are happening which all clearly show that the supply chain is disrupted.

So, as you correctly said, polyester is the most hit as of now and there of course, the concern now is that the price volatility and availability of polyester may gradually impact the cotton sector also. After all there is a lot of linkage right. So, if there is a shock in one sector of course, all the sectors will gradually share that shock.

Q) Okay, on the import front, we have issues with regards to the import of polyester and viscose because those two are crude derivatives. How much would prices have probably gone up in recent times? If you have to compare with January levels, how much prices of polyester and viscose would have probably gone up?

Polyester staple fibre was running around Rs 96 – Rs 98 per kg around January. We saw it move up to 30 per cent. So, there have been times when it is pegged at around Rs 130 per kg also. Though we are seeing a lot of volatility in the prices, it has increased by upward of 20 per cent.

Q) Of our total consumption of MMF, how much do we import and from which countries? Apart from them, are there source markets where we can start procuring or procure more to plug the supply gap?

Yeah, I think this question is sector agnostic today of course, because our main dependence in the textile value chain is at the PET level in terms of the fibre source for that. Even if there are other sources, the shifting of sources for this does not happen overnight, it takes some time.

And it is not just source shifting; it is a global price fluctuation that invariably is going to impact wherever you are sourcing from. So, from that point of view, this sector in India and everywhere else is surely going to get impacted and it is not just polyester. We are facing a problem with the packaging material. There are three-four critical inputs in the textile value chain which are getting impacted by this. So, whichever is the source, the price volatility is something that I think is going to be there because it is a global crisis we are part of today.

Q) So currently from which countries are we importing polyester and viscose?

For polyester and viscose, the major supplying countries are China, for some it is Indonesia and largely the ASEAN region and of course, for a few it is Oman and the western region. So, but as I told you earlier from the fibre, at the fibre stage, we have the two largest producers of both polyester and viscose in India. It is basically the raw material for polyester production, there is some dependence on imports.

Q) What about the availability of labour in textile? I have been hearing about labour being not available because we have an LPG crisis also going on, especially hubs like Tirupur and Surat. Can you tell me what are you hearing from the industry?

Yes, of course, where there is migrant labour, there is a concern that we are hearing and structurally most of the labour have, do not have a very organized infrastructure to support their stay there. In fact, which also raises the question of in the last few years, there has been discussion about how to facilitate, firstly recognize that in many of these clusters is largely fed by migrant labourers and hence safe and good accommodation facilities for them which is more organized is a need of the hour and I think this is one of those times we are realizing the importance of that.

Yeah, we are hearing that. I do know how acute it is. But for obvious reasons, labour is going to be an issue given the crisis in the LPG. And soon of course the increasing cost of transport and other things also.

We are hearing that because of this transport, prices going up, LPG prices, labour is not available, many units are also closed in Tirupur and Surat. How much are YOU hearing about this from the industry?

See it has been a little different for each place. It has been dependent on where the unit is placed and the scale of operation because as of now obviously the weight is hitting the smaller units vis-a-vis how it is hitting the large more organized units are different.

We have just started with a survey on that because it is an important aspect to start monitoring because obviously then some kind of policy support will be needed to address that also in the days to come if this crisis continues.

Q) Overall, what could be the impact of the war on the textile industry and exports? As you just mentioned, you are getting into a study of this whatever is happening in the industry. But at this point of time will you be able to quantify the revenue loss?

If it continues both from the point of view of raw material disruptions, but more importantly from the point of view of markets being affected by this and the demand situation weakening because of this, it has a potential to impact at least 50 per cent of my export market if not more. However, we are still optimistic that the numbers would be less.

The industry is extremely concerned. There is no doubt. The concern is also not just this, it is the currency uncertainty that is a concern. There are so many aspects that are coming up with each possible day, but I think it is a time that also tells you where your opportunities are and where you should build on. So, our focus is on building internal capacities through various policies and schemes. The lesser the dependence it will be better and then it is a time for sharpening our competitiveness because with the kind of uncertainties which are going to impact even purchasing power of our buyers is going to be far more cost-conscious and competitive in the coming days.

Q) When inflation hits, it hits everything, including textiles. And that would probably have a major impact on the consumption, not just in the domestic market, but the export markets as well, as you rightly pointed out.

Absolutely. And if you have seen the consumption trends in the last few years, usually also we have been seeing a little shrinking of the textile market because you know other FMCG goods like mobiles have taken a larger chunk, making the competitiveness pays sharper each year, but this is going to of course, put in far more challenges to that.

Q) At this point of time, do you think the government can do something to alleviate your pain, especially in the textile industry?

A money saved is also money earned. Whatever procedural simplifications, import relaxations for reducing the cost of import because of course that has a currency inflation aspect to it also. These can be done as there are FTAs with the markets like the EU and UK. So, these can be some very tangible ways of helping the industry retain some of the market share.