MEXICO CITY — The coronavirus outbreak is causing supply-chain disruptions across Latin America, where factories exporting apparel to the U.S. are facing significant feedstock delays from China and scrambling to find alternative sources.
So far, some brands and sourcing partners consulted claimed merchandise deliveries are not facing delays.
In Central America, where 200 million pounds of yarn thread and fabric are imported monthly to produce apparel, manufacturers are facing $300 million worth of feedstock delays, said Alejandro Ceballos, president of top trade lobby Vestex in Guatemala.
“Chinese yarn factories are seeing dispatch delays and if they continue, we don’t have enough local production to make up for it,” said Ceballos, adding that of $500 million of apparel exported monthly from the CAFTA-DR free-trade block, 40 percent uses yarn that comes from Asia. “We could have a big problem.”
Ceballos said manufacturers in the region tying Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Dominican Republic into a free-trade corridor with the U.S. are not yet delaying apparel deliveries to big U.S. brands such as Nike, Under Armour, Walmart or Macy’s, but that if the situation continues for another two months, they may need to do so.
Central America buys much of its fabric from Hangzhou in China, ordering from the likes of Cangnan Weixiang, Spinning Factory and Dongguan Xinchao Textile Co., which are having trouble shipping products due to logistic disruptions stemming from the virus.
Ceballos said Central America also buys yarn from U.S. suppliers and other firms in Guatemala, El Salvador and Honduras, but capacity is insufficient to meet China’s capacity.
If shortages increase, “we could bring fabric from other countries, but they would not meet rules of origin [for free-trade status] and would be very expensive. China’s thread and texturized yarn is half the price” of alternatives found elsewhere, he noted.
In Mexico, trade association and brand executives making collections for the likes of Levi’s, Tommy Hilfiger and Disney also reported bottlenecks importing raw materials from China, but insisted they don’t yet foresee production delays for shipping apparel to the U.S.
“We are in an orange alert,” said Fernando Muñoz, who oversees trade lobby Canaive’s Yucatan State chapter, adding that the area’s ‘guayaberas’ or Cuban-style shirtmakers are having trouble sourcing a range of inputs from China, notably cotton, printed fabrics, linens, rayon, Lycra, synthetic and natural fabrics, including polyester blends key to making garments for American labels including Lee and Levi’s.
“If this is not resolved in 60 days we will have problems with raw materials and making product,” Muñoz warned.
Yucatan, like much of Mexico, imports around 70 percent of apparel feedstocks from China and Asia.
In Mexico’s capital, the virus is having ripple effects. Eric Levy of Industrias Cavalier, which makes suits for Tommy Hilfiger and its own Cavalier brand, said he is boosting orders of poly-viscose fabric from Indian suppliers that are seeing a boon from China’s problems. Some of these include Banswara and Grassim, where Levy is also ordering cotton and cotton polyester, as well as Lycra and other synthetics from China’s James Fabrics and Shujan, located in Shaoxing city near Hangzhou.
“I am facing delays, but I buy a lot from India so I am OK so far,” Levy said, adding that virus infections appeared to have peaked in China, where many garment factories have resumed normal production. “I don’t think this is going to be that grave. Factories stopped for 10 days for the Chinese New Year and then for two weeks because of the virus, but now they are back.”
Levy conceded, however, that Mexican clothing brands and department stores that make private-label products in China, such as Liverpool, El Palacio de Hierro and Sears, are worried. “They are asking me to confirm deliveries. They are nervous,” he added.
In New York, Stephane Cremieux, owner of French suits trademark Cremieux, said business is going normally, at least for its jeans-making operation in Mexico, where he also sources for Dillard’s. “If you are speaking specifically about Mexico manufacturing, we don’t see any problems,” he said, adding that he doesn’t envisage product delays.
Cremieux, however, is seeing some fabric delivery postponements from Chinese suppliers that could impact the brand’s European business. “But we have a back-up plan,” said Cremieux, adding that the firm also has sourcing partners in Europe, South America (Peru) and Asia, where it is looking for sourcing options should the situation surrounding Covid-19 deteriorate further.
In Colombia, Grupo Crystal, which manufactures for Nordstrom, Lululemon and Vans, also expects to deliver products to customers on time.
“We have seen delays from China but not cancellations,” claimed Jose Vicente Calad, vice president of commercial operations.
He said highly integrated Crystal, which makes its own brands such as GEF and Punto Blanco, makes enough of its own woven and knit fabric to churn out shirts for other clients, such as Michael Kors. However, it buys some accessories and synthetic fabrics from China for its own apparel lines, Calad said, adding that he may have to boost orders from Vietnam, Cambodia and Indonesia if China’s sourcing problems worsen.
Still, the executive noted smaller Colombian makers without integrated supply chains could struggle to deliver their products to U.S. customers. He also envisaged issues stemming from cargo freight delays, even if Chinese output is normalized
“Ships are operated by different countries, so if fears [about the virus] worsen, they may not operate on time,” Calad concluded.