Chain Reaction

One year ago, we highlighted a ‘Perfect Storm’ in what was increasingly becoming the Crazy World of Cotton.

The pandemic, hideous supply chain knots, rocketing shipping container fees, labour disputes and import bans over human rights issues all added to the scenario. With so much going on in our lives then, it was easy for many to overlook the operating nightmare for those who handle linen within our industry in a chain encompassing suppliers, manufacturers and laundries offering linen hire services.

Now, with Covid being managed if not yet eradicated, ships hopefully getting back on the right but still expensive routes, and no stranded monster blocking the Suez Canal, we decided to take another look at the market. There was even the lifting of a decade-long boycott of Uzbekistan cotton products led by The Cotton Campaign coalition and backed by 331 international brands and retailers over past use of child and forced labour. The government and growers there won praise for getting their act together and transforming labour processes.

But by the time the Uzbeks had something to celebrate, the former Soviet Union country only had to look north and west to see dark clouds on the horizon – Russia had invaded Ukraine. And this one has thrown so much more up into the air when it comes to predictions about all of life, let alone the cotton market. As for Uzbekistan, like many concerned ex-Soviet bloc countries in the region, it appears to be solidifying links with the West, refusing to recognise breakaway states from Ukraine and sending aid there.

Beyond the human tragedy and uncertainty of outcome, measures already in place are hitting us all. Scary gas and oil prices, financial sanctions, air space closures (cargo planes must fly longer and costlier routes from Asia to Europe), refusal to allow ships with Russian connections to dock, all have a part to play. With Ukraine considered ‘Europe’s breadbasket’, a lengthy conflict may see farmers pressured to double up on food crops rather than a seasonal mix of, say maize and cotton.

Enough gloom? Oh, it doesn’t stop there. China has put millions of people back into strict lockdown in a bid to contain the spread of the milder but highly virulent Covid variant, omicron. This particularly affects Jilin Province, bordering Russia and North Korea. Chinese factories and port warehouses have been shut, including many which usually supply the US.

Shipping container bills from China to Los Angeles, for instance, fell a little at the end of last year but have now jumped 20 per cent in two months to 12 times the pre-pandemic price, while the cost of the fuel used by container ships has doubled in a couple of years and is only heading up right now. Supply chain specialists, having seen a good chunk of last year’s backlog cleared, are now expecting the situation to deteriorate again. Getting goods and raw materials from A to B is fuelling inflation worldwide.

Janice Raycroft reports

In India there is something of a furore over just how much organic cotton is actually organic (Photo: Xavier, flickr.com)

Fraser Donaldson, Vision Linen’s group hospitality sales and marketing director, describes all this as “a world turned upside down” and is advising linen users to assess what they need early, have a conversation with Vision and to plan in advance.

He says: “With the continued pressure on pricing and the extending lead times on logistics, there is one very simple message. That is, if you are not forecasting and placing orders now for the start of the busy season, there is a very strong chance you will not get the items you require in time. Vision holds a very healthy stock position as it was able to scale up for the Easter period to support the market’s seasonal reopening. Large-scale projects currently have an 18-week lead-time and cannot be supplied from replenishment stocks.”

Like others dealing in linen, he’s keeping a close eye on the price of cotton: “Prices have sky-rocketed due to low crop arrivals into the markets, lower production than estimated, higher demand from the spinning and ginning mills as they don’t have stock from last year, and the possible hoarding of cotton by traders.” US sanctions on Xinjian cotton have also added fuel to the rise of prices, putting extra demand on the global supply of cotton, Donaldson adds. Pressures on raw material will remain firm, he expects, both due to a cotton shortfall expectation for 2022 and rising crude oil prices.

“Supplier availability is another challenge we are tackling. The order books for towel and bedding manufacturers are at full capacity, even though there is a higher resistance to price hikes from customers. Vendors are facing two difficulties from a business perspective. First, the rise and change of raw materials has a direct impact on the cost, making the purchase and reserve of raw materials relatively disorderly.

“Secondly, the uncertainty of international logistics greatly affects the factories’ production plan and allocation of resources, and the mismatching of products and inventory with shipment varieties affects the delivery of goods, as well as the cost and capital allocation of the factories. In this situation, the tacit cooperation with suppliers is particularly important, especially with a quick response to order planning and deployment.”

And as he points out, Covid cases are still prominent in the cotton-growing nations, although at the time of writing most local governments other than China are choosing to refrain from imposing major restrictions that could negatively affect their economy.

The aim is to keep linen flowing as smoothly as possible, avoiding the laundry equivalent of the unnecessary petrol pump queues

Raj Ruia, director at Richard Haworth, says: “Overall prices are continuing to rise and unfortunately we don’t anticipate this upward trend will actually slow any time in the near future. Cotton rates have been on the up since 2020 due to a combination of Covid lockdowns, sanctions against cotton produced in key regions of China, and expensive shipping costs, and we’re sadly still waiting for these contributing factors to fully stabilise.

“In the last month alone prices have risen around the 30 per cent mark. This is a record high for this decade, although still not at the levels experienced in 2010; which is why we know there’s room for further increases still.”

In that list of the new Perfect Storm’s ‘ingredients’ we started with, at least one was left out – but Ruia is well aware of its potential impact: “The current price increase isn’t just due to the pandemic and sanctions, however. Droughts in America and a drier monsoon season in India in particular, have delivered heavy blows to crop production in the last 12 months and contributed vastly to rising costs. This is another wake-up call for the industry in terms of global warming, and how reliant we are on the weather (and it being predictable and stable) in the production of this natural product – and where we are waiting on one good crop per year.”

He continues: “At the moment container spaces are still short, which is further leading to rising costs. In addition to this, there are heavy delays at ports and some vessels are simply so full that they are unable to dock to collect new containers. It’s a ‘Catch 22’ situation which is definitely hampering shipments of a large proportion of imported consumer goods, not just cotton goods, to UK shores.

“We can’t say for sure what the future holds for the British cotton supply chain, however at Richard Haworth we are anticipating further increases in prices to follow in 2023, and possibly even beyond. Right now we are watching the developing crisis in Ukraine and considering the effect that this will undoubtedly have on exports to the rest of the world over the coming months. Coupled with the factors already at play, it’s definitely an expensive period for those of us in linen supply.

Cotton use for fabrics dates to prehistoric times, but the chapter being woven now is set to become a major part of its long story

Looks like a good harvest. But some farmers may switch to grain production if Ukraine’s supply fails

Vikas Shah, CEO at Swiscot, which includes Linen Connect, expects the next year and a half to be turbulent on many fronts, courtesy of the geopolitical risk, volatile markets, and climate uncertainty impacting supply chains.

He says: “Linen supply chains are highly complex, and exposed to several factors, most notably the price of our input commodities (such as cotton), energy and freight. On top of this, there are also fluctuations in cost caused by domestic and international policies around taxation and labour rates, and even – as we’ve seen in the pandemic – unexpected resilience tests of supply chains as ports clog-up.

“Our team monitor our global supply chain constantly, and are in regular dialogue with customers, giving them clear indications of what’s happening now, and our expectations therefore about how to make decisions to maintain continuity of supply. There is absolutely no doubt in our minds that we are going to see a sustained period of higher pricing across all periods over the next 12 to 18 months – whether we look at cotton, energy, input materials, freight or any other metric, there are no signs in forward charts of this easing off.”

His business is placing contracts at points where they see the most price efficiency to maintain price stability as much as they can for customers, but Shah warns all end users must be aware that if suppliers are coming in, and trying to compete on price right now, that corners will be cut on quality – there simply is no other way.

Shah believes past performance will help smooth the way: “We have over 40 years of experience running extraordinarily complex supply chains, and I’m extremely proud of the resilience we have been able to give our clients through the pandemic, and the current global conflicts.”

Vikas Shah, CEO at Swiscot, which includes Linen Connect, expects the next year and a half to be turbulent on many fronts, courtesy of the geopolitical risk, volatile markets, and climate uncertainty impacting supply chains.

He says: “Linen supply chains are highly complex, and exposed to several factors, most notably the price of our input commodities (such as cotton), energy and freight. On top of this, there are also fluctuations in cost caused by domestic and international policies around taxation and labour rates, and even – as we’ve seen in the pandemic – unexpected resilience tests of supply chains as ports clog-up.

“Our team monitor our global supply chain constantly, and are in regular dialogue with customers, giving them clear indications of what’s happening now, and our expectations therefore about how to make decisions to maintain continuity of supply. There is absolutely no doubt in our minds that we are going to see a sustained period of higher pricing across all periods over the next 12 to 18 months – whether we look at cotton, energy, input materials, freight or any other metric, there are no signs in forward charts of this easing off.”

His business is placing contracts at points where they see the most price efficiency to maintain price stability as much as they can for customers, but Shah warns all end users must be aware that if suppliers are coming in, and trying to compete on price right now, that corners will be cut on quality – there simply is no other way.

Shah believes past performance will help smooth the way: “We have over 40 years of experience running extraordinarily complex supply chains, and I’m extremely proud of the resilience we have been able to give our clients through the pandemic, and the current global conflicts.”

These are tough times for everyone, but some are very grateful for the circumstances which are making linen supply less of an issue, with only any port congestion to deal with when their goods reach the UK. This particularly applies to Sherry Textiles in Burnley owned by The Nile Linen Group run by Ashraf Said and his family since launch in 1996 and now Egypt’s top exporter of bed linen.

As Sherry Linens sales manager Alan Saunders explains, it may involve a sea journey of 3,663 nautical miles, but there’s some ‘smooth sailing’ here on a direct route with few potential snags: “Having our own mill in Egypt means our goods come straight from Alexandria to Felixstowe. So delivery is currently 21 days standard or even 14 days by express service. That can be compared to as much as 18 to 20 weeks from India or Pakistan.” When we spoke they’d just confirmed a delivery leaving Egypt on 27 March and set to reach the UK on 8 April. And, of course, being established ‘onsite’ in Alexandria also means access to shipping containers is a lot easier. There’s also a bit more room for flexibility if a client needs to change or bring forward an order, although getting it ‘right first time’ is always appreciated.

Where nature meets high tech: a drone being used to check the crop

Also taking a positive approach is Stephen Broadhurst, managing director of Star Linen in South Wales. The business is being kept busy as the build up to Easter and the summer season approaches: “It’s all looking rather promising in the UK. Living with Covid, the booster programme, growing confidence in going out and about – the staycation boom, students returning to universities, the leisure market picking up.”

However, Broadhurst is well aware that volatile markets, not just in cotton, will impact on all parts of our lives. He’s keeping a watchful eye on prices, including oil as this will directly affect the cost of polyester, often used in linen mixes with cotton. That, and shipping costs from Asia, remain a significant issue. He notes that it’s not just about the actual containers – some ships were taken out of service during the height of the pandemic for long overdue refurbishments and not all are back on the seas.

Broadhurst believes that a rethink of how many of us do business in the UK is likely as world events unfold and it’s an issue that fascinates rather than unsettles him. “Our customer base will seek surety of continuation of service. How do we give that assurance to customers, and how do we remain competitive?”

He suspects there will be an increasing demand for more UK-manufactured items like pillows and duvets, even though the raw materials will still have to be brought here for production. Environmental issues will be a key driver in all this, which suits Broadhurst down to the ground as he’s a champion of finding new uses for items in our industry which have gone past their original lifespan but can be repurposed through innovative recycling schemes.

Broadhurst uses the platform at Hospitality Expo, part of CleanEx 2022, to explain the benefits of the circular economy, his determination that Star Linen products do not end up in landfill, and admiration for the TFR Group in Blackburn, now recycling 7,000 mattresses a week.

Now’s the time for those who use linen to once again scrutinise their processes and iron out any wrinkles in the system. That’s been a polite and regular message to the likes of hotels and restaurants served by independent laundry company CLEAN throughout the ups and downs of the pandemic and the staycation boom.

But now it’s even more urgent as supply chain issues increase alongside higher seasonal usage. “We’ve heard of hotels lending stock to other hotels running short of linen,” says Ted Walker of CLEAN. “Regardless of which laundry you use, this is not good practice as once it leaves the site the chances of it returning to the original supplier are greatly reduced.”

It’s at times like this that the use of RFID really demonstrates its value, with both laundries and end users able to efficiently manage supplies and calculate need. The aim is to keep linen flowing as smoothly as possible, avoiding the laundry equivalent of the unnecessary petrol pump queues. No hoarding is another message – and that’s not always deliberate. Cupboards full of unused linen built up over time by businesses simply ordering the same amount each week even if their needs have reduced restrict the amount of linen in circulation.

Regular checking of the delivery schedule to ensure it’s in line with expected occupancy levels and keeping top-ups to agreed stock levels all helps things to run smoothly. And as Walker points out, making sure linen held on site is regularly circulated and used in order ensures that one batch of linen is not going round in circles to the laundry and back until worn out, while some languishes unused at the bottom of the cupboard.

This is about sustainability and the lifetime of linen, not just good practice at a time of uncertainty. Clean linen takes up less space than dirty linen, but it needs to ‘breathe’ rather than be flattened over months by a weighty pile up on top, with harder to remove creases becoming a feature.

CLEAN have been working with suppliers such as Vision to ensure stock levels of high-quality linen are maintained, whether that’s use of freeports or even airfreighting in shipments. At the same time there’s an understandable approach to quotes for services given to potential clients. They must accept that the price offered relates to a deal at that time. Come back in three months and it may well have to be recalculated. Like everyone else, our laundries are having to live and work with a ‘New Normal’ which isn’t normal at all.

Now’s the time for those who use linen to once again scrutinise their processes and iron out any wrinkles in the system

COTTON AROUND THE WORLD

War in Ukraine is taxing the minds of cotton experts in the US, where Dr O.A. Cleveland, a market analyst and Professor Emeritus at Mississippi State University, says that grains and oilseeds have currently taken its ‘favoured child’ role with Wall Street speculators.

What is driving all this is the increasing likelihood that Ukraine’s wheat and corn will not be harvested. And with Black Sea ports serving other countries growing grains subject to being ‘open only at the will of Russia’, Cleveland says it’s not surprising prices have exploded. However, he says that rapidly rising fertiliser and energy costs, alongside inflation, mean that growers who switch will not be better off.

Many stories tend to get overlooked in the news cycle when there’s a world crisis, and one that has not gained as much attention as it might in other circumstances is the furore over supposedly organic cotton from India.

India is the planet’s largest producer of organic cotton. Its use in branded consumer and designer goods which command higher prices has come under increasing scrutiny as the credibility of the certification scheme is investigated, with allegations of fraud and poor inspection practice.

Questions are being asked around the world. For instance, late last year the EU announced it would no longer accept organic cotton certification from several major companies in India. The US Department of Agriculture also terminated an agreement to recognise organic products overseen by Indian authorities.

It’s bad news for those farmers genuinely growing organic cotton, caught up in a mire of politics and corruption. Not that India is the only country under scrutiny, organic cotton from China and Turkey is also being looked at.

In Asia the recent price hike in cotton is encouraging farmers to increase the amount they grow, as demonstrated by those in the Rangpur region of Bangladesh. Cotton production in Rangpur totalled 6,056 tonnes in 2021 and with more farmers turning or returning to cotton there has been a push by government to increase this to 7,200 tonnes this year as part of a bid to cut down on imported raw cotton. Meanwhile China has launched its own sustainable cotton standard, considered by critics in The West to be simply propaganda following bans on cotton from China’s Xinjiang region over alleged used of forced labour. However, The China Cotton Association is ploughing on, and the China Cotton Sustainable Development Programme is now claimed to cover issues such as workers’ rights, environmental impact, and fertiliser use

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