Blog: Michelle RussellHanjin Shipping collapse triggers fear of West Coast port repeat

Michelle Russell | 19 September 2016

The recent bankruptcy of South Korea's Hanjin Shipping, the world's seventh-largest container shipper, at the end of August, has left billions of dollars worth of merchandise in limbo, leaving the fallout for apparel and footwear importers and exporters unclear.

Some of the merchandise is sitting in Asia waiting to be loaded onto ships, some is already aboard ships lying idle in the ocean and denied entry to ports, and some is sitting at already-congested US docks waiting to be picked up. The fears now are that many apparel and footwear companies will miss deadlines for holiday deliveries, with retailers left counting the cost of missing merchandise and lost sales. There are also worries of a repeat of the chaos of last year's West Coast port delays, and concern the bankruptcy could pile on additional pressure for US importers, including an increase in freight pricing amid growing concerns over a shortage of sea carriers.

ANZ Bank recently predicted 7.2% GDP growth for Cambodia in 2016, mainly fuelled by rising clothing exports, suggesting the country's garment sector is doing fine. But dig deeper, and it seemsthe overall situation of the Cambodian garment industry is less optimistic. According to the Garment Manufacturers' Association in Cambodia (GMAC), the key problem is the sector's lack of competitiveness, with exports only growing in markets with beneficial access, like Canada, Japan and the EU.

Gary Yap, regional senior sales executive at Juki, the market leader for sewing machines in Cambodia, says across Southeast Asia's low labour cost region comprising Cambodia, Vietnam and Myanmar, the former is currently the weak spot primarily due to a sharp rise in wages in recent years, which makes manufacturers' margins too slim to invest in new equipment.

In Bangladesh, labour rights groups are calling for garment factory safety initiatives to be extended to cover boiler safety, after at least 31 people died when a boiler exploded at a packaging facility. The explosion happened on 10 September at the Tampaco Foils factory in Gazipur, around 30km from Dhaka - with the blast triggering a huge fire and partial collapse of the three-storey building.

Factory safety is a major concern in Bangladesh, and the latest tragedy "demonstrates the ongoing dangers to industrial workers in that country and the failure of global corporations to take meaningful steps to protect the safety of workers in their supply chains," says the Worker Rights Consortium, International Labor Rights Forum, Clean Clothes Campaign and Maquila Solidarity Network.

Indeed, the Accord on Fire and Building Safety in Bangladesh has severed ties with four more garment suppliers after they failed to implement workplace safety measures - with one failing to submit a Corrective Action Plan (CAP).

And, recent research has found that Bangladesh's strength as a low-cost producer of ready-made garments is also a weakness, limiting innovation and the country's ability to link to the global fashion industry value chain. It also means that if this cost advantage were to change, Bangladesh would not currently be diversified enough to compensate with other exports.

Meanwhile, synthetic fibres have seen a surge in popularity as global oil prices decline, and this growth is set to continue - making the next decade a perfect time for clothing brands to incorporate these materials into their products.

'Why synthetic fibres are a safe bet for the future' is one of a four-part management briefing published by just-style that also takes a look at what the future holds for world wool supply, how low leather prices are creating an opportunity for apparel brands, and the challenges of cotton supply and demand.

Elsewhere, the US is to restore trade benefits to Myanmar after a lapse of more than 25 years. The country, formerly know as Burma, will be added to the US's Generalized System of Preferences (GSP) trade preference programme from 13 November. While the GSP programme excludes most textile and apparel products exports to the US, the designation of a country as eligible for GSP sends a strong message that it is taking steps to improve worker and intellectual property rights.

And, with anti-TPP rhetoric flying thick and fast in the run-up to the US election, a new report suggests the Trans-Pacific Partnership trade deal could shift global trading patterns for textiles and lower demand for some US textile exports.

The analysis, 'US Textile Manufacturing and the Proposed Trans-Pacific Partnership Agreement', published by the Congressional Research Service, notes that textiles are a sensitive sector in the TPP, an agreement that would establish a free-trade zone across the Pacific if it is approved by Congress and foreign governments.

In other news, theupcoming EU free trade agreement with Vietnam is expected to boost European growth and job creation in the retail sector, as well as the development of Vietnam; post-Brexit currency is expected to weigh on Primark's margins; and, the US is being urged to pursue a case against China over its cotton policy.


Building an interconnected global trade network

Banking giant HSBC is focusing on the apparel industry with a new digital B2B platform that enables retailers and brands, manufacturers and suppliers to build trusted relationships, exchange data, and...


US apparel imports continue upward trajectory

The volume of US apparel imports continued to climb in September on the month prior as business picked up for retailers following the pandemic lockdown. Year-on-year was a different picture, however, ...


Covid-19 shines a light on new supplier and brand relationships

Amid the challenges and ongoing uncertainty thrown up by the global coronavirus pandemic, some apparel and footwear brands and retailers appear to be engaging more with their suppliers in key areas li...


Covid-19 remains top disruptor of supply chains

The Covid-19 pandemic remains the top disruptor of supply chains, new data shows, with its impacts resulting in an increase in cargo theft, smuggling and child labour....

just-style homepage

Forgot your password?