Blog: Leonie BarrieWool prices pile on more pressure

Leonie Barrie | 2 August 2011

Much has been written about the volatility affecting cotton prices, but there's another raw material whose cost is also climbing ever higher: wool.

Falling supply and rising demand have left apparel firms scrabbling around for scarce wool stocks, with costs rising fast as a result. Add this to other factors currently impacting the supply chain, and wool pricing is piling yet more pressure on their already stressed operations.

Companies with a broad international footprint will be best able to offset tough conditions by taking advantage of booming demand for items like expensive wool suits in countries such as China and India. But for those operating purely in traditional markets, business will continue to be difficult.

The impact of rising prices across the supply chain, coupled with the ongoing debt crisis in Europe, are thought to be behind Li & Fung's decision to cut 40 jobs at its Hong Kong office. While the layoffs represent less than 1% of its Hong Kong workforce, they are thought to be a sign that firms are buying less, negotiating harder and probably taking the decision to source direct in the hope of a better deal.

In contrast, expansion is underway at Sri Lankan apparel giant Brandix, which is growing its presence in Bangladesh with a US$14m investment that offers new capacity for woven bottoms and new sourcing options to customers. The facility is at the Comilla Export Processing Zone, where Brandix eventually plans to acquire nine more plots.

But violent labour unrest has forced Bangladesh's Grameen Knitwear to close its factory in the Dhaka Export Processing Zone. Protesting workers vandalised Grameen's factory and demanded better wages and allowances - even though the plant was launched by Bangladesh's Nobel prize winning micro-finance innovator Muhammad Yunus, and had a reputation for better-than-average pay and conditions.

For TAL Apparel, one of the world's leading garment suppliers, the threat of inflation across the supply chain has been turned into an opportunity to do things differently. CEO Dr Harry Lee tells just-style how the Hong Kong based firm's long-time focus on efficiency, sustainable development, and added value is helping to combat rising costs and set it apart from the competition.

But Danish clothing firm IC Companys has admitted that garments sold under its Cottonfield, InWear and Part Two brands contained excessive "chemical residues" and that it failed to tell authorities and customers. Even though it recalled the items, it did not fully comply with statutory regulations on the breaches.


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