MEXICO CITY — As the coronavirus epidemic continues to whipsaw global supply chains, Central American suppliers have conceded they will have to delay apparel deliveries this month as key Chinese feedstocks are not arriving on time.
But as manufacturers in Guatemala and elsewhere in the region scramble to find ways to deliver merchandise to the likes of VF Corp. and Walmart Inc., their competitors in Colombia and Brazil are rushing to market their products to U.S. buyers struggling to find sourcing alternatives outside of China where the cancellation of the key Canton Fair has left many brands wondering where they will source apparel for delivery in 2021, according to U.S. trade executives.
Meanwhile, Latin America’s biggest fashion week, São Paulo Fashion Week, is still expected to take place from April 24 to 28, said sources close to the organizers, even as a string of global fashion shows have been scrapped. The annual Apparel Show sourcing fair in Guatemala, however, will likely be canceled.
“This is getting very serious,” conceded Alejandro Ceballos, president of the main Guatemalan apparel lobby Vestex, adding that up to 70 percent of apparel shipments could be postponed in the next 30 days amid a critical shortage of cotton and synthetic yarn and thread to assemble garments for U.S. sale. “This week, we could see 20 percent of merchandise delayed, next week 40 percent and in a month, it could be 70 percent. Unless U.S. brands are more flexible [including with their sourcing rules], the industry will not be able to cope.”
Ceballos claimed Guatemalan mills are also rushing to find enough accessories to finish products, notably labels, buttons, dyes, etc., while factory machinery and equipment are also under pressure, unnerving factory owners that won’t have parts to fix machines that could suddenly go down.
While China has said the COVID-19 outbreak has been contained, Vestex claimed the factories from which it sources remain critically understaffed as many operators have failed to return to their posts due to transport restrictions. “A lot of people who traveled for the Chinese New Year have not been able to go back to work,” Ceballos continued. “There is a very big mobility problem.”
Specifically, 54 percent of Chinese manufacturers say less than 50 percent of workers have returned to work, according to a recent survey from Chinese trade associations querying 294 firms which Vestex used in a presentation this week. “The lack of workers is a very urgent problem for small companies because 80 percent of them have 50 percent of workers that have not returned,” Vestex said.
More than 68 percent of garment manufacturers in China have resumed production and expect output to reach 50 percent capacity later this month, completely recovering in April if the situation stabilize, according to the Vestex presentation.
Ilse Metchek, president of the California Fashion Association, countered that things in China are not as bad as people think — factories in Guangzhou, the country’s third-largest textiles pole, are quickly ramping up production.
“Most of my manufacturers said they are working and were only down 30 percent,” said Metchek. “Guangzhou is the third-largest apparel producer in China after Beijing and Shanghai and they have not shut down.”
The executive acknowledged that garment makers are facing raw-material shortages all over the world — a phenomenon that might usher a return to more natural materials such as cotton, silk and linen to make clothes as opposed to synthetic and more man-made fabrics such as those made in the world’s largest clothing manufacturer.
Metchek said current supply bottlenecks, coupled with the cancellation of the Canton Fair, have left many fashion brands scrambling to find sourcing alternatives.
“That is the fair where many intra-Asia deals [for next year’s sourcing] were being made — it’s enormous,” Metchek noted. “So that has left many people wondering where they will make clothes for 2021. There is an assumption that things [sourcing wise] won’t be the same, at least throughout this year. There is going to be a very tough back-to-school situation but the main question now is what will we do in 2021?”
As U.S. brands and retailers fret, the California Fashion Association has invited manufacturers from Colombia as well as Turkey and Portugal and elsewhere to panels exploring alternatives to China. “We can get fibers from South America and yarn from Turkey and Portugal. All of them see this [the crisis] as an opportunity to market their product,” she said.
Metchek said Colombia could step up its knits and cotton product offering that benefits from U.S. duty-free access.
“The best country for product in South America is Colombia and they are really intensifying their marketing and outreach. They are very good at denim. They have 20,000 machines going.”
Peru is also a good option for luxury fabrics such as pima cotton and alpaca.
Some Central American executives said while the coronavirus is a growing threat to their supply chains, they still plan to deliver garments on schedule.
“We have not had problems because of coronavirus,” said Dean Garcia, executive director at leading Nicaragua trade lobby Anitec. “We are monitoring the situation and planning a response strategy.”
Garcia said he and other Central American executives will meet with the National Council of Textile Organizations in early April to assess how to best tackle the coronavirus threat. One strategy being discussed is having U.S. cotton and yarn makers sharply boost production, but at prices Central American producers can afford. “We need to look at how they can reconvert and produce more and at what price,” said Garcia, adding that U.S. feedstock prices are at least 40 percent higher than China’s.
Even though Nicaragua, which churns out apparel for the likes of Under Armour, Adidas or Walt Disney, buys polyester fabric from China, it has enough reserve stocks to deal with shortages, Garcia claimed. The nation imports less cotton fabric to make knits than its Guatemala or other Central American neighbors, he added. And the majority of Nicaragua’s key woven and twill fabric inputs come from Cambodia, Pakistan and Singapore, according to Garcia.
Brazilian executives, meanwhile, stuck to positive views about the outlook, noting that it has not yet hit manufacturers making fashion for the U.S.
“So far production is normal,” said a top Brazilian apparel executive, adding that international labels are calling main trade federation Abit to inquire about sourcing opportunities.
Abit’s President Fernando Pimentel added: “We don’t have raw material shortages to attend the industry’s needs so far. But if this crisis continues, we could start seeing problems in three months or so.”
Brazil’s local retailers — which were starting to see sales firm up amid an economic recovery — are facing some disruptions, however, as roughly 35 percent of them buy apparel from China, Pimentel conceded.
Luminosidade, the events firm behind São Paulo Fashion Week, did not return calls seeking comment about whether it will postpone the event.
“The show is still expected to happen,” said a source close to the organizers. “People are not that worried about the virus,” said the source. “We are just trying to live life here in Brazil.”