Global fibre demand falters due to COVID-19 uncertainty

Global fibre demand falters due to COVID-19 uncertainty
Global wool and cotton trade slowed down drastically as orders were being postponed and cancelled due to the impact of COVID-19. Local wool producers have been warned by the industry body to expect uncertainty in the market. Photo: Glenneis Kriel

The impact of the coronavirus disease (COVID-19) global pandemic is being felt across the global fibre industry, with production, logistics and retail sales being brought to a grinding halt.

According to the International Cotton Advisory Committee (ICAC), the effect of COVID-19 on the cotton and textile industries is very uncertain.

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“The fast-moving pandemic has injected a tremendous amount of uncertainty into every link in the global supply chain. Millions of people are self-isolating and the cotton and textile business is at a virtual standstill,” a statement by the ICAC said.

A recent survey by the International Textile Manufacturers’ Federation (ITFM) indicated that the global textile industry had experienced a 31% decline in orders by early April.

The survey also pointed out that all regions around the world had suffered a significant number of cancellations and/or postponements of orders, especially South America and Africa, where orders declined 41% and 38% respectively.

“Only a few weeks ago, some regions were not fully affected by the pandemic. The new [figures] on orders reveal the dramatic extent this demand shock has [had] on the textile industry around the world. The uncertainty about the duration of the crisis weighs heavily on the industry,” the ITMF said in a statement.

The international wool industry had also been negatively affected by the pandemic, leaving many wool producers with uncertainty about the options available for their clips.

The National Farm Online website reported that due to lockdowns in the US and Europe, many orders had been cancelled. “China was the only purchaser of Australian wool, and buyer assurance plummeted.”

Hennie Bruwer, CEO of Cotton South Africa, told Farmer’s Weekly that he expected cotton consumption to be suppressed worldwide due to the slowdown of the global economy, as well as the effects of COVID-19.

“Retail sales are declining and there are cancellations of orders that will trickle down to the raw product.”

However, he said he believed that South Africa’s cotton industry was in a good position because of the quality product produced by local farmers, which earned them premium prices.

“We are also a very small player in the global cotton industry. Our size and good quality will make it easier to trade our cotton,” he said.

He said the crop would be harvested in the next two to three weeks, and traders had already hedged against any risks associated with the harvest. Bruwer said that although he expected stockpiling, he did not foresee drastic price reductions.

“Although we will not see the same world prices as we did over the past two years, we are hedged by the exchange rate that is currently in our favour. We will thus not be too bad off.”

Local wool producers were also warned that the world economy was under pressure and the wool market would suffer the effects.

“So, don’t make irresponsible decisions on short-term trends. Wool will always earn a place in the market,” advised Leon de Beer, general manager of the National Wool Growers’ Association of South Africa.