Textile and apparel exporters are staring at a lot of uncertainty in international trade following the Russia-Ukraine conflict.
With the ongoing Russia –Ukraine war, garment exporters in Tirupur are worried that the volatile market would have a cascading effect on the garment industry too.
Tirupur Exporters Assocaition’s Raja M Shanmugham said 40% of its export business is with the European Union and the UK with a monthly turnover of Rs 1200 crore. Most of the European buyers and brands have branches or franchises set up in Russia. Though no specific data is available on the quantum of garments sent by EU buyers to Ukraine and Russia, exporters here estimate that it could be around Rs 50 crore a month.
While some exporters have put on hold plans to further explore the Russian market, there are others who are not quite willing to do business with the country, due to lower rating, no payment guarantees from Russian buyers.
Exporters now believe that buyers from the EU may slow down purchases, due to a possible slowdown of their economies, forcing them to cut expenditure. It may also push up prices of logistics, raw materials, finished products. Consumers are already refraining from shopping.
SIMA said exporters have been advised to wait and watch.
Global shipping companies, such as Ocean Network Express and Germany’s Hapag Lloyd have suspended booking to or from Russia, and Maersk – one of the world’s largest – says it is considering such a move.
Moreover, while state-run Export Credit Guarantee Corporation of India (ECGC) has rejected reports that it has withdrawn coverage of outbound shipment transactions involving Russia, it has tightened the norms, much to the dismay of some exporters. The agency has now modified the insurance category of Russia from “open cover” to “restricted cover category – I” for which revolving limits (usually valid for a year) are approved on a case-to-case basis. ECGC has an 85% share of India’s export credit insurance market.
Shanmugham expressed surprise at the ECGC move to tighten the coverage norms for exports to Russia. “Already, the ECGC coverage factors in various risks, including natural calamities and war, when it gives “open cover”. So, what is the rationale behind changing the insurance category of Russia to “restricted cover category – I” and put exporters in a tight spot?” he asked.
Russia-Ukraine war may affect Panipat textile industry
Panipat’s handloom and textile hub is reporting a fall in demand for handlooms in India and abroad soon after the war began. Panipat industrialists said they have orders of around Rs 4,500 crore from many European countries and Russia, but they fear cancellations as the war continues.
“The impact of war can already be seen – prices of raw material (dyes and chemicals) imported from Germany and Turkey have increased by 10-35%. Prices can increase further, fears Sanjeev Manchanda, president of Panipat Dyes and Chemical Traders’ Association, and has urged the government to provide some relief on shipment charges and import duties.
The industry in Panipat expects that European demand for home textiles from Panipat will be impacted, due to the severe economic problems expected as a fallout of this conflict, as most European countries are directly or indirectly linked with the war. Panipat exporters also fear that they may have to renegotiate prices of pending orders due to the higher prices and supply chain disruptions.
As per figures, there are around 10,000 small and large handloom units in Panipat with annual exports of around Rs 10,000-12,000 crore and 80% of the total production is exported to European countries. After Bhadohi, Panipat is the second largest manufacturer of carpets in country, who have to compete with Turkey and China.