Italian textiles are sure to experience a tough year in 2009, but how quickly can they recover?
March 16, 2009
During 2008, Italian cotton yarn spinners found themselves once again in a highly competitive market in which only the most efficient and financially strong could compete and survive. The escalation in prices for raw materials during the first two quarters, particularly for cotton, very expensive energy utilities costs and the unfavorable Euro/Dollar exchange rate, combined with the chronic inability of our spinners to pass on to their customers the full degree of increases, has caused more than a few companies (including two units of one of the largest groups) to turn out the lights and lock the doors forever.
As a direct consequence, cotton consumption has been tremendously reduced to less than 400,000 bales. The statistics indicate that the spinning of cotton fibers in the first nine months of 2008 was down about 18% from the previous year. Because those who have been able to continue are not satisfactorily benefiting nor have sufficient margins, there is a possibility of additional defections in the coming months.
Is the cotton spinning industry going to disappear completely? This is becoming a very logical question.
The 2009 year will once again be difficult for Italy. In its latest World Economic Outlook, the International Monetary Fund has forecasted that the gross domestic product of Italy will decline by 0.2% (after a 0.1% decline in 2008), and that Italy will therefore lapse into a long recession period. The most recent indicators confirm the signals of alarm launched by the IMF; the consumption of the family has been lowered because of inflation and because of the increase in debts. Families and enterprises are affected directly by the losses of value in the stock exchange, but also indirectly because of the reductions of their income due to the actual financial crisis.
The Italian textile companies are suffering extremely because of this situation, despite the fact that they have started a brave transformation in these last few years, having moved their positioning on products of high value or having changed their business strategies to transfer their productions to cheaper foreign countries.
The actual problems for our enterprises are also born from our relationships with the banks; the Institutes that already in the past did not even accompany the positive choices have now drastically reduced their support to the investments, making life for the small and medium-sized companies very difficult. In the first eight months of the year, the billing of Italian textiles lowered by 6.5% and the inside consumption lowered by 4.4%.
Also those who work in the fashion industry are feeling the crisis; these exports show a contraction in comparison to one year ago. Sales to the EU countries decreased by 3.8% due to the dips in traditional markets for the Made in Italy fashions, including exports to Germany (-9.8%) and France (-9.5%).
But like a photo of light and shade, there are also few instances of affirmation and reasons for optimism. Significantly, the statistics regarding fabric exports show increases towards non EU markets. China and Hong Kong are the frontrunners in this area; the Italian exports to China now exceed the value of the imports.
According to Paolo Zegna, Vice-President of Confindustria and President of the groups Ermenegildo Zegna and the Milan Unica Fair, the Italian Textile Industry base is stronger today than it was in 2001, when the greatest losses occurred.
The last edition of Milano Unica, the Textile Fair promoted and organized by the five prestigious exhibitions IdeaBiella, IdeaComo, Moda In, Prato Expo and Shirt Avenue, has confirmed the vital importance of the textile sector among the Italian manufacturing industry and surpassed all expectations. Closing figures for the event showed about 31,500 participants registered and 666 exhibitors, 518 being Italian and 148 European.