Global recovery reduces apparel inventory pile up, but not so for cotton

After a sharp drop in apparel exports earlier this year due to covid, global shipments have begun to recover and bloated inventories are being thinned down again. 

However, it is a different story for cotton as unlike apparels output remains nearly the same as before. The ending stocks globally are expected to rise by 22%, according to a  US Department of Agriculture report.

Textile exports from Bangladesh and India fell by 85 and 90 % respectively in April and May, while shipments from Pakistan, Turkey and the European Union witnessed a decline of over 60%.

That coincided with a drop in US imports by 55%, EU and UK imports fell by over 40% and Japan by 30%.

“This led to massive buildups in inventory throughout the supply chain. As consumer demand recovered, excess inventory was slowly liquidated, delaying any significant recovery,” the report said, noting that the covid outbreak had hit both supply and demand at the same time.

“Lockdown restrictions slowed consumer spending while also halting cotton-related processing. Spinning mills’ operating rates in India, Pakistan, and the United States fell over 90 percent, while declines were slightly lower in China,” it added.

The recovery in textiles production has been uneven. While China’s recovery is faster than many other countries as operating rates returned to near pre-COVID-19 levels within 3 to 4 months, other countries’ rates are still below pre-COVID-19 levels after six months.

While the rapid shutdown of spinning mills somewhat limited the buildup in yarn and fabric inventories, cotton stocks expanded rapidly. When COVID-19 emerged, most of the 2019/20 crop was harvested and the current year’s planting had begun.

Expectations of global cotton production to be only slightly lower this crop year, but global consumption is a different story altogether. According to the USDA,  the outlook for global consumption in November compared to the one in February is 17 million bales lower, down by 14 %. Next crop year, cotton use is expected to be  7 million bales lower, which is down by 6 %.

“The speed of recovery in consumer demand is uncertain. Recent apparel imports include deferred demand as consumers made purchases that were initially delayed. Moreover, some demand that was lost, such as school uniforms, 2020 summer and vacation clothing, hotel use of cotton bed sheets and towels, and other seasonal clothing items, may never be recovered,” says the report.

It adds that the long-term impacts of remote work on workplace and school attire purchases remain unknown.  

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