Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
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1 FORWARD RETAIL SOURCING REPORT CBX Software’s Retail Sourcing Report provides research and analysis aimed at informing global sourcing and buying decisions for retailers, brands and other sourcing and supply chain professionals. Each issue includes a snapshot of key information and trends impacting global sourcing, such as economic conditions in sourcing countries, container shipping trends, currency exchange and commodity rates. We also cover hot topics ourselves and include insight from analysts and other experts. If you like this content, please share: The Number 1 Collaborative Sourcing LinkedIn App for Retailers and Suppliers! Americas +1.858.264.1133 www.tradebeyond.com Asia +852.2378.6300 EMEA +49.89.9040.5110 www.cbxsoftware.com Statement of Indemnity: CBX Software recommends that any information provided in this report be weighed against other sources and experts on the individual topics covered. As such, CBX Software bears no legal or fiscal responsibility for any potential harm or outcome which may result directly or indirectly from information provided in this report.
2 CONTENT RETAIL SOURCING REPORT 0 FORWARD 1 MANUFACTURING OUTLOOK (PMI) 3 LOW COST COUNTRY SOURCING (LCCS) HIGHLIGHTS 4 SOUTH EAST ASIA 4 SOUTH AND WEST ASIA 5 CHINA MINIMUM WAGE TRENDS 6 LOW-COST COUNTRY SOURCING WAGE TRENDS 7 CONTAINER FREIGHT RATES & TRENDS 8 TRADE CURRENCY RATES & TRENDS 9 GLOBAL COMMODITY RATES & TRENDS 10 CRUDE OIL 10 RUBBER 10 METALS 10 COTTON 11 PLASTICS AND SYNTHETIC FIBERS 11 QUALITY CONTROL INDICATORS 12 FOCUS TOPICS 13 COVID-19, E-COMMERCE ACCELERATOR 13 THE OUTLOOK FOR GLOBAL TRADE IN Q4 AND BEYOND 14 ABOUT CBX SOFTWARE & TRADEBEYOND 15
3 Purchasing Manager’s Index (PMI) To help understand industry and economic conditions in a country, the PMI Index tracks variables such as output, new orders, stock levels, employment and prices across private companies in the manufacturing, construction, retail and service sectors. Over 30 countries and regions participate in various PMI surveys. 4 Manufacturing Outlook (PMI) A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates growth. This update looks at a selection of emerging economies and key sourcing countries, providing indicators for recent months based on data provided by IHS Markit, NIKKEI, CAIXIN and other sources. To help understand industry and economic conditions in a country, the Purchasing Manager’s Index (PMI) tracks variables such as output, new orders, stock levels, employment, and prices across private companies in the manufacturing, construction, retail, and service sectors. A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates growth. While over 40 countries and economic Q4 2020 News regions and Analysis: participate in various PMI surveys, this update looks at a short-list of emerging economies and key sourcing countries to provide indicative trends. (Data Source: IHS Markit) As businesses reopened and consumer demand picked-up following lockdowns and closures due to the pandemic, Q4 global manufacturing 2020 Summary: rebounded As businesses throughand reopened Q3consumer and into Q4 as output, demand exports picked-up and new following orders expanded lockdowns and to one of the highest levels since 2018. The upcoming Christmas season also pushed trade flow and stretched closures due to the pandemic, global manufacturing rebounded through Q3 and into Q4 as output, exports global supply chains still recovering from the impact of Covid-19. While input costs have reached record levels, and new orders expanded to one of the highest levels since 2018. The upcoming Christmas season also businesses felt more confident about the coming year. Overall the global trend was recovery and growth, with pushed trade some exceptions flowasand such stretched Mexico, global supply Indonesia, chains Malaysia andstill recovering Myanmar, from economies whose the impact of Covid-19.to continued While contract under the impact of the pandemic. The economic picture for 2021 is still unclear, given the potentialthe input costs have reached record levels, businesses felt more confident about the coming year. Overall of new global outbreaks trend across was recovery Europe and NorthandAmerica. growth, with some exceptions such as Mexico, Indonesia, Malaysia and Myanmar, whose economies continued to contract under the impact of the pandemic. The economic picture for 2021 is still unclear, given the potential of new outbreaks across Europe and North America. Jul Aug Sep Country Summary of Indicators 2020 2020 2020 Brazilian manufacturing continued to recover at pace, supported by a weaker local Brazil 58.2 64.7 64.9 currency; new orders, production and exports saw record growth, despite higher costs. Chinese manufacturers maintained their robust growth momentum through Q3, with China 52.8 53.1 53.0 new business growing at the fastest rate since 2011. Columbia’s manufacturing economy continued to improve in Q3, despite easing off in Columbia 54.2 51.2 50.4 September as quarantines eased, resulting in output growth and optimism for 2021. Czech Manufacturing in Czechoslovakia continued to improve through Q3 as domestic and 47.0 49.1 50.7 Republic export orders and production increased, while competition pushed input costs lower. India’s economy rebounded strongly through Q3, as factories ramped up production India 46.0 52.0 56.8 and increased headcount to fill new orders, following 6 months of contraction. Indonesia’s manufacturing had a setback in September following new outbreaks of Indonesia 46.9 50.8 47.2 Covid-19, with new lockdowns limiting production, employment and purchasing. Malaysia saw some pullback in manufacturing activity in late Q3 following an initial Malaysia 50.0 49.3 49.0 rebound from the pandemic effect, with businesses confident for a stronger 2021. Mexico’s manufacturing continued to feel the impact of Covid-19 through Q3 and into Mexico 40.4 41.3 42.1 Q4 as many businesses remained closed, yet businesses confidence remains high. Manufacturing came to a standstill in September after new lockdowns measures were Myanmar 51.7 53.2 35.9 enforced, reducing output and headcount, making for an uncertain end to the year. Despite easing off in Aug/Sept, Polish manufacturing improved marginally though Q3 Poland 52.8 50.6 50.8 reflecting growth in employment, despite weakness in output and new orders. In line with other economies that saw a rebound in Q3, then a drop-off in September, Russia 48.4 51.1 48.9 Russia’s production sector lost momentum into Q4 with uncertainty for the new year. South Easing of South Africa’s lockdowns in Q3 resulted in growth in output, new orders, 44.9 45.3 49.4 Africa employment and purchasing, as companies attempted to recoup pandemic losses. South Manufacturing in South Korea stabilized through Q3 as businesses reopened and 46.9 48.5 49.8 Korea output grew; ongoing recovery will depend on both domestic and foreign demand. Turkey’s manufacturing sector saw a sustained recovery through Q3, with further Turkey 56.9 54.3 52.8 gains in output and new orders, along with job creation and optimism for 2021. Vietnam’s manufacturing economy picked up in September from the effects of Vietnam 47.6 45.7 52.2 lockdowns in Q3, with output growth and stronger business confidence for 2021. © 1995-2020 Copyright by CBX Software. All rights reserved. Q4 2020 Retail Sourcing Report
Low Cost Country Sourcing (LCCS) Highlights 4 This section looks at selected issues impacting sourcing from key LCCS destinations based on data available at the time of printing the report, alongside official import/export numbers highlighting global sourcing trends. Summary: Asian economies continue to be heavily impacted by pandemic lockdowns, given they rely on trade with each other as much as they do on consumer product exports to Western countries. Garment producing countries such as Bangladesh and Cambodia continue to be hard hit by cancelled orders and factory shutdowns which have resulted in mass unemployment and social unrest. The only Asian countries who are seeing growth, now and into 2020, are China and Vietnam. South-East Asia Cambodia – Cambodia’s garment workers turned to the streets to protest the sudden loss of income due to Covid-19 factory related closures. Over 200 factories have closed, thousands of workers receiving dismissal notices and no severance pay – in violation of labor laws. The garment sector in Cambodia employs over 800,000 people, mostly women at an average wage of US$ 190/month ($1.30 an hour). Indonesia – Indonesia is another country hit hard by the pandemic, with over 400,000 cases, leading to shutdowns and mass unemployment. The Indonesian government passed a new law in October opening the door to labor intensive manufacturing and foreign investment, aimed at creating jobs. Labor-intensive industry makes up less than 2% of Indonesia’s GDP, much lower than other Asian countries. Philippines – The Philippines continues to experience a severe fallout from the pandemic with the International Monetary Fund (IMF) predicting a GDP contraction of 8.3% in 2020. To put it in context, Asian economies together are projected to contract by 2.2%. This is the sharpest projected contraction among South-East Asian countries. As of mid- October, the Philippines had almost 350,000 COVID-19 cases. Thailand – In mid-October, Thailand’s new central bank governor predicted that the country’s economic recovery is expected to take at least 2 years to reach pre-pandemic levels. He warned that Thailand, South-East Asia’s second largest economy, could contract by a record 7.8% in 2020, partly due to the heavy impact of tourism. Anti-government protests are also reportedly limiting consumption and business confidence Vietnam – Aside from China, Vietnam is one of the only Asian economies to report economic growth in Q3 and into the busy Christmas and 2021 pre-Chinese New Year season. Vietnam’s GDP rose by 2.62% in Q3, with exports increasing 11%, partly due effective management of the pandemic through strict lockdowns allowing for rapid business reopening. Vietnam also continues to benefit as manufacturers shift from China. Q4 2020 Retail Sourcing Report
5 South and West Asia Bangladesh – Manufacturing in Bangladesh continues to bear the impact of the pandemic, with order cancellations and factory closures resulting in layoffs and tough times for garment workers living on already sub-standard wages. According to the Bangladesh Garment Manufacturer’s and Exporters Association (BGMEA), 1,150 factories have been impacted, with $3.18 billion in pandemic related order cancellations. India – India continues to be hit hard by the pandemic with around 8 million cases and over 100,000 deaths by mid-October. While average daily numbers are on the decline, India is still the worst affected country after the US. Given the substantial number of potential cases in a population of 1.3 billion, the government has enforced lockdowns to some extent, but is also trying to balance the economic fallout of halting the economy. Pakistan – Despite a relatively low-number of Covid-19 related deaths, Pakistan’s economy is still set to contract through 2020. To stimulate their economy and create jobs, the Pakistani government is pushing hard for the $6.8 billion, 2.655 ML-1 railway project, part of the China-Pakistan Economic Corridor that will connect Karachi in the South to Peshawar in the North. This project will be 90% funded by Chinese loans. Turkey – Turkey’s COVID-19 death toll reached 10,000 in mid-October with almost 370,000 cases, with new lockdowns in place as the country fights off a second wave. While Turkish President Erdogan focused on pushing a political agenda across the Muslim world, the Turkish economy went into a free-fall, with the lira falling to record lows against the USD, inflation at 11.7% in Q3 and economic growth reached a 10-year low. Sources: News Reports, Statistical Bureaus, Li & Fung Group (charts) © 1995-2020 Copyright by CBX Software. All rights reserved.
China Minimum Wage Trends 6 Q4 2020 News & Analysis: It is almost redundant to still look at individual Chinese provinces and regions for the purpose of finding an edge in labor cost. For more than a decade the Chinese central government has pushed their economy away from labor intensive industry towards higher value production and focused on growing domestic consumption versus 7 exports. Despite this policy exports grew strongly in Q3 and should continue to grow through Q2, 2022 assuming the pandemic recovery trend continues. China Minimum Wage Trends Since 2005, the Chinese economy has grown from $2.3 trillion in GDP to $14.4 trillion in 2019, with average annual income increasing by at a similar ratio from $1750 to over $10,000. As China’s leaders sit down for Q4 2020 News & Analysis: It is almost redundant to still look at individual Chinese provinces and regions for the purpose of finding their an edge next in laborfive-year plan, cost. For more than we canthe a decade beChinese sure central that government similar policies has pushed oftheir managing growth economy away will from labor mean steadily increasing intensive minimum industry towardswages across higher value China’s production provinces and focused anddomestic on growing regions. consumption versus exports. Despite this policy exports grew strongly in Q3 and should continue to grow through Q2, 2022 assuming the pandemic recovery trend continues. Since 2005, the Chinese economy has grown from $2.3 trillion in GDP to $14.4 trillion in 2019, with average annual income increasing by at a similar ratio from $1750 to over $10,000. As China’s leaders sit down for their next five-year plan, we can be sure that similar Note:ofThese policies managing are official growth wage will mean guidelines steadily mandated increasing minimum by each wages across China’sprovince provinces andorregions. region based on information publicly available as of Oct 1, 2020. As such these numbers serve as an indicator. Actual wages Note: These are official wage guidelines mandated by each province or region based on information publicly available as of Oct 1, may include benefits, food, 2020. Ashousing etc. Minimum such these numbers serve as anwage isActual indicator. typically wages40-60% may includeofbenefits, average food,total wage. housing etc. Minimum wage is typically 40-60% of average total wage. 2020 Minimum Wage Updates (official) Monthly Min Avg Wage City/Region/Province Increase % Official Update (RMB) Anhui 1,550 20.6% Nov 1, 2019 Beijing 2,200 3.8% Jul 1, 2019 Fujian 1,800 7.4% Jan 1, 2020 Chongqing 1,800 20.0% Jan 1, 2019 Gansu 1,620 10.2% Jun 1, 2019 Guangxi 1,680 16.7% Jan 1, 2020 Guangdong 2,200 12.3% Jul 1, 2019 Guizhou 1,790 6.6% Dec 1, 2019 Hainan 1,670 12.6% Feb 1, 2019 Heilongjiang 1,680 15.4% Oct 1, 2019 Henan 1,900 8.2% Oct 1, 2018 Hebei 1,900 14.8% Nov 1, 2019 Hubei 1,750 13.1% Nov 1, 2019 Hunan 1,700 13.6% Oct 1, 2019 Inner Mongolia 1,760 8.0% Aug 1, 2019 Jiangsu 2,020 8.1% Aug 1, 2018 Jiangxi 1,680 15.1% Jan 1, 2019 Jilin 1,780 22.5% Oct 1, 2019 Liaoning 1,810 7.6% Nov 1, 2019 Ningxia 1,660 12.4% Jan 1, 2019 Qinghai 1,700 15.2% Jan 1, 2020 Shaanxi 1,800 7.0% May 1, 2019 Shandong 1,910 6.7% Jun 1, 2018 Shanghai 2,480 2.5% Apr 1, 2019 Shenzhen 2,200 4.9% Jul 1, 2018 Sichuan 1,780 7.1% Jul 1, 2019 Tianjin 2,050 5.1% Jul 1, 2019 Tibet 1,650 17.8% Jan 1, 2019 Xinjiang Uyghur 1,820 12.9% Jan 1, 2019 Yunnan 1,670 10.6% May 1, 2019 Zhejiang 2,010 8.4% Jan 1, 2019 Q4 2020 Retail Sourcing Report © 1995-2020 Copyright by CBX Software. All rights reserved.
7 Low-Cost Country Sourcing Wage Trends Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt, Ethiopia, and Turkey to give a comparative view. Wages vary by region or province and indicate either an estimated or actual/official rate. In cases with a distinct variance, we provide an average.8 Currency fluctuations mean that these figures are approximate at the time of finalizing this report. Low-Cost Country Sourcing Wage Trends Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt, Q4 2020 News & Analysis: Ethiopia, and Turkey to give a comparative view. Wages vary by region or province and indicate either an estimated or actual/official rate. In cases with a distinct variance, we provide an average. Currency With no clear horizon for the end of COVID-19, there is little cause for optimism on the labor front in low cost fluctuations mean that these figures are approximate at the time of finalizing this report. sourcing countries, in some cases the gains in compliance and the movement towards a living wage might be going backwards. While Bangladesh approved a wage increase for leather goods and footwear workers, Q4 2020 News & Analysis: With no clear horizon for the end of COVID-19, there is little cause for optimism the first for them since 2013, Indonesia is pushing ahead with a controversial Omnibus Bill aimed at relaxing on the labor front in low cost sourcing countries, in some cases the gains in compliance and the movement business, labor, and environmental laws to encourage foreign investment and create more labor-intensive jobs towards a living wage might be going backwards. While Bangladesh approved a wage increase for leather with minimum wages set by regional governors. Similarly, workers in low-cost countries such as Cambodia and goods and footwear workers, the first for them since 2013, Indonesia is pushing ahead with a controversial Myanmar face an uncertain future until the pandemic ends. Omnibus Bill aimed at relaxing business, labor, and environmental laws to encourage foreign investment and create more labor-intensive jobs with minimum wages set by regional governors. Similarly, workers in low- cost countries such as Cambodia and Myanmar face an uncertain future until the pandemic ends. Note: Figures are provided in USD/month based on currency exchange as of Oct 1, 2020. Minimum wage Note: Figures are provided in USD/month based on currency exchange as of Oct 1, 2020. Minimum wage policies are updated as per data available at the time of finalizing this report and are based primarily on policies unskilledarewages. updatedConsult as per data available sources suchatastheFair timeWage of finalizing Guide this report and are based or Wageindicator.org toprimarily assess onand calculate unskilled wages. Consult sources such as Fair Wage Guide or Wageindicator.org benchmarks for wages in particular countries and regions not covered here. to assess and calculate benchmarks for wages in particular countries and regions not covered here. BANGLADESH CAMBODIA CHINA EGYPT ETHIOPIA $95 (Sep 2020) $190 (Jan 1, 2020) $163-$359 (Jan 2020) $116 (April 2019) $26 (Jan 2015) As of September 2020, Cambodia announced Minimum wages in Egypt raised their Ethiopia is still the Bangladesh an increase to their China are set by local minimum age to 2000 working on a system Ministry of Labor and minimum wage from governments and have Egyptian pounds ($116) to determine a Employment approved US$182, to $190 a varying wage formulas from 1200 pounds, minimum wage for the a 94% minimum wage 4.4% increase, to take (with housing, food, applying to all workers, private sector. Entry increase for leather effect from January 1, overtime etc.) with higher increases level wages in the goods and footwear 2020. Political and Actual 2020 wages for going to the private textile sector range workers from 3,652 labor tension manufacturing jobs in sector. This increase from $35 to $40. The taka (2013) to 7,100 continues as China are much higher came ahead of a June base minimum wage taka (US $85). opposition push for at US$870/month 30, 3029 target date. is officially more rights and pay. $18/month. INDIA INDONESIA LAO PDR MALAYSIA MYANMAR $94-$236 (Oct 2020) $120-$298 (Oct 2020) $124 (May 2018) $270-$295 (Jan 2019) $80 (Mar 2018) The Indian Parliament As of Q4 2020, The Lao Government Malaysia implemented Myanmar revised its is in the process of Indonesia is working to approved an increase a nationwide minimum minimum wage from reforming labor finalize a controversial in minimum wage from wage of RM 1,100 as of K600 ($2.70) per day policies. By September Omnibus Bill focused Kip 900,000 (US$107) January 2019. Wages to K4,800 (3.60) or of 2020 3 of 4 labor on creating jobs in to Kip 1,100,000 vary by region and are K600/ hour for an bills passed through labor heavy industries, (US$142)) in key supposed to be eight-hour workday in and await final to create jobs and provinces which took reviewed every 2 years. 2018. This is increase approval from the incentivize foreign effect in May 2018. The new directive is of 33%, mostly affects Indian President. investors. being enforced widely. garment workers. PHILLIPPINES SRI LANKA THAILAND TURKEY VIETNAM $132-$190 (Jan 18) $67 (Mar 2016) $248-$265 (Apr 1/18) $482 (Jan 2020) $132-190 (Jan 1/19) Wages in the Sri Lanka adopted two Thailand is in the To combat inflation of Vietnam announced Philippines vary by laws on minimum process of updating close to 12%, Turkey they will increase their region, skill level and wages as of early their minimum wage announced a minimum minimum wage by wage classification. 2016, mandating a from a current wage increase of 15%, 5.3% in 2019. This Negotiations are still minimum wage of Rs minimum of 308 – 330 effective Jan 1, 2020 to increase was relatively underway, but Manila 10,000 (+/- $67) and Baht per day to a 2,324 liras/month lower than the 2018 for example saw a 21 an increase of Rs proposed 400 Baht per (US$381) net. This increase of 6.5%. Peso ($0.42) increase 2,500 (+/-f$17) for day. Most businesses brings the gross Wages range from in their daily wage to workers earning less are opposed to this minimum wage (before $125-$180 / month 491 Pesos ($9.82) in than Rs 40,000 per higher wage as being deductions) to 2,943 across 4 key regions Q4 2017. month (+/- $270) too high. liras/month (US$482). in Vietnam. Sources: WageIndicator.org, SAFSA, Local News Reports Q4 2020 Retail Sourcing Report © 1995-2020 Copyright by CBX Software. All rights reserved.
Container Freight Rates & Trends 8 Q4 2020 News and Analysis: While spot rates on major East-West shipping routes have climbed higher through Q2 and Q3, carrier service levels and on-time arrivals of container ships has plummeted. Through late Q3, carrier reliability was below 50% on shipments from Asia to US East and West Coasts and down 69% for Asia-North Europe. Container ships were on average five days late in September, according to Sea-Intelligence Maritime Analysis. Carriers have continued to reduce capacity through the pandemic, which has kept prices high but left importers frustrated. Importers are also dealing with port congestion and unpredictability in inventory forecasting and replenishment. With concern over a second wave of Covid-19 and economic and political uncertainty in the US and Europe, container shipping rates and service are unlikely to improve until well into 2021, if at all. Asia - North Europe Trade Lanes Asia-North Europe container shipping rates have continued to increase through 2020, based on limited capacity and strong demand, especially following pandemic shut-downs and approaching the busy Christmas and pre-Chinese New Year season. Container shipping rates are expected to remain high given that carriers are carefully managing capacity below the level of demand to protect their interests. According to Sea-Intelligence, shipping volumes on Asia – North Europe routes were up 2% year-on-year in July to 1.5 million TEU. Asia – North America Trade Lanes Both East and West coast US spot container shipping rates reached annual highs in Q3 and continue to climb into Q4. Similar to Asia-North Europe lanes, carriers cut capacity by blanking sailings from Asia to North America during the first half of 2020 (the pandemic), but as demand increased, they have not reintroduced sufficient capacity. Heading into the peak Chr istm as seaso n and subsequent peak pre-Chinese New Year period, the current trend in shipping rates/capacity is most likely to continue. Reports show that consumer goods spending is up dramatically, driven by e-commerce growth and by consumer’s shifting spend from services to goods such as furniture, home office, exercise and other products which should continue to drive demand for shipping. Sources: IHS Markit, Joc.com, Alphaliner, SeaIntel Q4 2020 Retail Sourcing Report
9 Trading Currency Rates & Trends Following are exchange rates and indicators for major currencies commonly factored into global sourcing costing estimations. The fallout from Covid-19 has extended to foreign exchange with many investors selling currencies in countries that are hard hit with the virus and placing their assets in safe-haven currencies – especially the US dollar. The dollar is likely to hold11 strong since there are few alternatives, given the Euro’s limited role as a reserve currency and the fact that the Chinese Renminbi is still tightly controlled. 11 11Trading Currency Rates & Trends Currency volatility continues to impact purchasing, resulted in higher costs and threatening margins. Other factors driving volatility are the upcoming US election, uncertainty over future stimulus packages, the Brexit Tradingongoing negotiation, Currency Rates uncertainty & Trends with US/China trade andFollowing the potential resurgence of Covid-19 indicatorsthis Winter. Trading Currency Rates & Trends are exchange rates and for major currencies comm costing estimations. The fallout from Covid-19 has extended to foreign ex Following are exchange rates and indicators for major currencies commonly factored into global sourcing currencies in countries that are hard hit with the virus and placing their costing estimations. The fallout from Covid-19 has extended to foreign exchange Following areUS with manyrates exchange investors and isselling indicators for major currencies comm especially the dollar. The dollar likely to hold strong since there are CBX Software currencies helps in countries that you are hard hit stay with theup toand virus date with placing theirchanging costing limited assets estimations. role as a reserve trading in safe-haven currencies Thecurrency fallout from – and Covid-19 has the the fact that extended Chineseto foreign Renminb e especially the US dollar. The dollar is likely to hold strong since there are fewinalternatives, currencies countries given that arethe hardEuro’s hit Learn with More the virus and placing thei policies limited role as and new a reserve tariffs currency andrule with the fact our that the AI sourcing Chinese Renminbi solution. volatility especially continues to impact purchasing, resulted in higher costs and t is still the UStightly controlled. dollar. Currency driving volatility are the The dollar upcoming isUS likely to holduncertainty election, strong since there over a futu volatility continues to impact purchasing, resulted in higher costslimited and threatening role as a margins. reserve Other and currency factors the fact that negotiation, ongoing uncertainty with US/China tradethe Chinese and Renminb the potential re driving volatility are the upcoming US election, uncertainty over futurecontinues volatility stimulus to packages, the Brexit resulted in higher costs and impact purchasing, negotiation, ongoing uncertainty with US/China trade and the potential drivingresurgence volatility of areCovid-19 this Winter. EUR / USD (Oct 2019 –the Octupcoming 2020) US election, uncertainty over fut negotiation, ongoing uncertainty with US/China trade and the potential r EUR / USD (Oct 2019 – Oct 2020) EUR/USD Low High EUR / USD (Oct 2019 – Oct 2020) 2 year 1.06 1.94 1 year 1.06 1.19 1 month 1.16 1.87 T U The Euro appreciated against the th USD through Q3 on optimism over wT the European economy but flattened wU with fears of a second COVID-19 et wave. The EUR/USD pair is 1w expected to trade in the range of thw 1.17 until 2021. Assuming stability in the the US and Covid-19 containment, 1 EUR The/ Chinese CNY (Julycould the Euro 2019reach Yuan – July made 2020) 1.20 nextagainst gains year. the Euro t EUR / CNY (July 2019 – July 2020) through Q3, weakening into Q4. Chinese government t EUR/CNY CNY (July 2019 – Low July 2020) High officials have warned of risks of CNY fluctuation in EUR / both directions 2 year through 2021. Most 7.49 8.31predictions are that the Chinese currency 1 year 7.55 will continue 8.31 to appreciate against both the Euro7.83 1 month and the USD. 8.01 T a The Chinese Yuan made gains w against the Euro through Q3, gT weakening into Q4. Chinese ria government officials have warned of dw risks of CNY fluctuation in both pg directions through 2021. Most cur predictions are that the Chinese ad USD / currency CNY (Julywill 2019continue to appreciate – July 2020) p against both the Euro and the USD. c USD / CNY (July 2019 – July 2020) a The Chinese Yuan appreciated against the USD USD / CNY (July 2019 –Low USD/CNY July 2020) High through Q3 to 2018 levels, after plunging to 2008 lows in Q1 early this year. Drivers for Yuan 2 year 6.64 7.17 appreciation are a fast recovery in the domestic 1 year 6.64 7.16 economy and ongoing strength in exports. Volatility 1 month 6.64 6.82 T is expected to continue through Q4 and into 2020 The Chinese Yuan appreciated a based on the US election outcome and COVID-19 le against the USD through Q3 to 2018 QT containment. levels, after plunging to 2008 lows in aa Q1 early this year. Drivers for Yuan dl appreciation are a fast recovery in the stQ domestic economy and ongoing ea strength in exports. Volatility is ind Sources: XE.com, News/Analyst Reports expected to continue through Q4 and os Sources: XE.com, News/Analyst Reports into 2020 based on the US election e outcome © 1995-2020 Sources: and COVID-19 Copyright XE.com, containment. by CBX Software. News/Analyst All rights reserved. Reports i © 1995-2020 Copyright by CBX Software. All rights reserved. Sources: XE.com, News/Analyst Reports o © 1995-2020 Copyright by CBX Software. All rights reserved. © 1995-2020 Copyright by CBX Software. All rights reserved.
Global Commodity Rates & Trends 10 12 Global Commodity Rates & Trends Q4 2020 News and Analysis: Q4 2020 News & Analysis: Almost all commodity prices recovered in the third quarter of 2020 following Almost all commodity prices recovered in the third quarter of 2020 following steep declines earlier in the steep declines earlier in the year due to the COVID-19 pandemic. Following a strong summer rebound, as year due to the COVID-19 pandemic. Following a strong summer rebound, as lockdowns lifted, momentum in lockdowns commodity lifted,prices momentum in commodity has stalled in recentprices weekshasasstalled second in recent wavesweeks of theas second waves pandemic of the and economic uncertainty pandemic and economic uncertainty continued. A levelling off in demand is coinciding with limited supply continued. A levelling off in demand is coinciding with limited supply suggesting that commodity prices face suggesting an uphillthat commodity battle. prices Oil prices, facetend which an uphill battle. to lead mostOil prices, which prices commodity tend toin lead mostdirection, either commodity areprices likely to have a slow in either direction, are likely to have a slow recovery into 2021. The forecast for recovery into 2021. The forecast for commodities depends on geopolitical factors such as thecommodities depends on outcome of the geopolitical US election, the ongoing Brexit scenario and how long it takes for a COVID-19 vaccine to roll-out.it factors such as the outcome of the US election, the ongoing Brexit scenario and how long takes for a COVID-19 vaccine to roll-out. Crude Oil Crude Oil Crude oil prices have doubled since their April low, supported 70 70 Oil US$ per barrel Crude oil prices have doubled since their 65 Dated by sharp supply cuts by OPEC. 65 Dated April low, supported by sharp supply cuts 60 60 Brent,light Brent,light However, prices remain a third 55 55 blend 38 blend 38 by OPEC. than lower However, prices remain a third pre-pandemic API 50 API lower 50 45 45 levels.than pre-pandemic Oil prices levels. Oil prices are expected 40 40 Dubai,mediu Dubai,mediu m, fob fob are expected to increase to increase gradually gradually in 2021 as in m, 35 35 Dubai Fateh Dubai Fateh demand 2021 is matched as demand by an is matched by an easing 30 30 25 25 32 API 32 API easing of supply. of supply. The 20 20 West Texas West Texas pandemic could have lasting 15 15 Intermedia Intermedia effects on oil demand though 10 10 40 API, API, The pandemic could have lasting effects 40 as changes in consumer Midland Midland on oil demand though as changes in Texas Texas behavior influence demand. consumer behavior influence demand. Rubber Rubber Natural rubber prices have soared through the pandemic Rubber, No. 3 Smoked Sheet (RSS3), Singapore Natural partly onrubber strong prices demand have soared for PPE Exchange through such as the pandemic protective partlyOn gloves. on strong 2.0 2.0 Price in US cents per kilogram demand the supplyfor PPE suchpandemic side, as protective related On gloves. labor shortages the supply side, and pandemic 1.8 1.8 weatherlabor issues in Thailand 1.6 related shortages andandweather 1.6 Vietnamin (key producers) have (key issues Thailand and Vietnam 1.4 1.4 resulted in reductions in rubber producers) havefactors production. Key resulted in reductions in in rubber 1.2 1.2 rubber price volatility into 2021 include in rubber production. Key factors 1.0 1.0 price volatility into 2021 COVID-19 recovery, US include China COVID-19 recovery, US China trade tension and the trade tension and the American 13 American election outcome. election outcome. Metals Metal Despite the steepest global Metals US$ per metric ton economic Despite contraction the steepest in recent global economic 20000 history, contraction base metal in recent prices history, have base metal 18000 16000 3000 pricessurged well well have surged above abovetheir their pre- pre- 14000 pandemic pandemic levels.levels. Key drivers Key drivers are are Chinese 12000 2442 Chinese stimulus measures stimulus measures and the pandemic and 2000 10000 thewhich recovery pandemic recovery has fueled which an industrial 8000 1873 6000 and manufacturing rebound. Going and has fueled an industrial 1000 manufacturing rebound. Going 4000 forward, waning stimulus measures and 2000 124 forward, waning stimulus the potential of over-supply might impact 0 0 measures and the potential of pricing. Metals are expected to see a over-supply might impact pricing. modest gain in prices in the range of 2% Metals are expected to see a for 2021. Tin Aluminum Copper Nickel modest gain in prices in the Zinc Lead Iron range of 2% for 2021. Q4 2020 Retail Sourcing Report Cotton Q4 2020 Retail Latest reports indicate a decrease in global cotton production Sourcing (-934,000 bales toReport 116.3 million) along with an increase in global mill-use (+1.5 million bales to 114.2 million) through Q3/Q4. This has led to 2.7 million bale reduction for 2020/2021 forecasts, which still leaves stockpiles at the one of the highest
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Prices PricesDelta have Prices Prices have have have have which increase increase increase impacted steadily steadilysince steadily increase steadily increase steadilysince the pandemic since since US pandemic pandemic sincepandemic cotton induced induced pandemicinduced inducedbelt. lows inducedlows lowsin lowsWhile early in in indicators April early early lowsininearly and April April earlyApril April have and and and are haveheld have have that steady held held held cotton steady steady steady prices should continue partly due partly partly to todue due rise partly dueHurricane to Hurricane to into to 2021, Delta Hurricane Hurricane Deltawhich Delta volatility Delta impacted which which which impacted the impacted could impactedcome US the the cotton theUS UScotton from US belt. cotton cottonthe While belt. belt. While outcome belt. indicators While While indicators indicators of areand the indicators that are US are have arethatthat held cotton cotton cotton election, that cotton steady prices prices prices ongoing prices US/China (and US/ partly due to Hurricane Delta which impacted the US cotton belt. While indicators are that cotton prices should shouldcontinue should should continue to rise continue toto into rise rise 2021, into into2021, into volatility 2021, could volatility volatility come could could comefrom come from the the from outcome the outcome outcomeof the of US ofthe the election, USUS election,ongoing election, ongoing ongoing should continue Vietnam) trade continue to to rise tension rise into 2021, and 2021, volatility how volatility could long could come recovery come from from the from the outcome outcome ofofthe COVID-19 theUSUStakes. election, election, ongoing ongoing US/China US/China (and US/China US/China US/Vietnam) (and (and US/Vietnam) US/Vietnam) trade tension trade trade tension andand tension how andhowlonglong how recovery long recovery recovery from COVID-19 from from COVID-19 COVID-19 takes. takes. takes. US/China (and (and US/Vietnam) trade tension US/Vietnam) trade tensionand andhow howlong longrecovery recoveryfrom fromCOVID-19 COVID-19 takes. takes. Speed Scale Simplicity Source: Cotton Inc, News Reports Source: Source: Source: Cotton Cotton Source: Inc, Inc,Inc, Cotton News News Reports Reports News Reports Sources: Cotton Inc, News Reports Plastics and Synthetic Fibers © 1995-2020 Copyright by CBX Software. All rights reserved. © © 1995-2020 Q4 2020 Snapshot: © 1995-2020 1995-2020 Copyright Copyright by Copyright © 1995-2020 by CBX Copyright by CBX by CBX CBX Software. Software. All Software. All rights All rights Software. rights reserved. reserved. reserved. All rights reserved. 14 Synthetic fiber prices, especially for nylon and polyester fell dramatically through Q3 on lower oil Plastics and prices, Synthetic currency Fibers devaluations and lower demand for finished goods from Asia, Europe, and the US. Stability on the supply is also an issue going forward. Synthetic fiber prices in Asia fell by more than Q4 2020 News: Synthetic fiber prices, especially for nylon and polyester fell dramatically through Q3 on lower 20% year-on-year, mostly due to price drops in polyester, the most widely used fiber. oil prices, currency devaluations and lower demand for finished goods from Asia, Europe, and the US. Stability on the supply is also an issue going forward. Synthetic fiber prices in Asia fell by more than 20% year-on-year, mostly due to price drops in polyester, the most widely used fiber. Plastics & Fibers, Regrind/ Flakes (Euros/kg) 1.0 0.9 0.8 Nylon 0.7 0.6 Polyester 0.5 ABS 0.4 PVC 0.3 PP 0.2 PS Sources: IMF data, Plasticker, ICIS © 1995-2020 Copyright by CBX Software. All rights reserved.
12 Quality Control Indicator This report frequently covers quality control and quality assurance issues. Audit and inspection data which tend to mirror sourcing activity, provide an indicator of activity and trends in various sourcing regions. According to data from Quality Inspection provider QIMA, while sourcing and global trade picked up dramatically through Q3 to meet demand, inspection and audit trends suggest that the recovery scramble has meant a sacrifice on sustainability and social compliance. Many businesses went into survival mode, cutting costs where they can, adding pressure on suppliers, in turn putting worker safety and product quality at risk. Most of the issues around quality we have seen are related to inconsistencies with suppliers and the ability to adapt to the added demands of the pandemic, both at the buyer and supplier level. Demand for inspections in China grew at the rate of 11% (year-on-year) overall in Q3, especially from US and European buyers in the electrical and electronics sectors. Lower demand for inspections (down 15% in Q3) in the Chinese textile and apparel sector reflected the ongoing shift in apparel production to lower cost countries such as Bangladesh, Vietnam, and others. Overall, South-East Asia saw a pick-up in demand for inspections of 10% year-on-year, with growth in Myanmar, Indonesia, the Philippines, and Vietnam – who all took business from China. South-Asia also saw growing demand for inspections and audits, led by Bangladesh where inspections grew 86% in September. Sources: QIMA Data, News Reports The trend of nearshoring, which was picking up in recent years appears different for US and European buyers. The QIMA data suggests that US brands were more likely to buy from factories reopening in South Asia than from Latin or South America, whereas European brands continued to increase their sourcing (and inspections) from countries such as Morocco, Egypt and Tunisia, which all saw double digit growth. Sources: QIMA Data, News Reports Q4 2020 Retail Sourcing Report
13 Focus Topic: COVID-19, E-Commerce Accelerator One of the bright spots that emerged through the COVID-19 pandemic is online retail. Already a growing force prior to 2020, world-wide implementation of physical-distancing and stay-at-home orders has accelerated the progression of e-commerce. To put it in perspective, according to Statista (chart below) in 2015 e-commerce represented 7.4% of total global retail sales, by late 2020 e-commerce’s share of total retail will be above 16.1%. By 2023, online retail should comprise 22% of total retail. This pandemic driven fundamental shift in consumer behavior will bring lasting effects as consumers shop more online and retailers improve service levels. The cliché of “adapt or die” applies to retail more than ever. Online shopping trends we see now provide a sense of where e-commerce is headed. Lining the Nest Nearly half of consumers shifted their spending across online verticals such as apparel and electronics, but categories such as health, fitness, groceries, and DIY did especially well as people spent more time at home. Online orders in most of these categories grew by two- or three-times times year-on-year, with some retailers seeing increases of more than 20 times. (e-Marketer). Retailers that capitalized on consumer trends such as food preparation, online fitness and home offices were rewarded. Those able to perfect online models such as home delivery (Amazon) thrived through the pandemic and will continue to do so after. Platform vs Retailer/Brand Another evolving trend that grew through the pandemic is the customer focus on product availability in a competitive marketplace. Amazon grew exponentially not because it is cheaper, but because they provide a platform for competing products, often direct from the source which are vetted (reviewed) by other consumers. Other marketplace such as Wayfair and eBay have also carved out niches, but traditional retailers such as Best Buy and Walmart are also betting heavily on their own marketplaces to drive growth. Re-evaluating Cost-Cutting The biggest takeaway from the shift in consumer retail behavior, accelerated by the pandemic, is that conventional forms of cost-cutting are less relevant. For example, historically retailers and brands placed a heavy focus on the input cost factors we cover in this report – labor costs, material costs, currency exchange, logistics efficiency and speed to market. Going forward, the biggest area where retailers and brands need to look at cost-cutting is not through the supply chain, but at the end of it - whether in store or online or a combination. As an example, companies such as Bed-Bath and Beyond have done well with their Buy-Online- Pick-up-in-Store (BOPIS) model which has allowed them to cut bricks and mortar locations. © 1995-2020 Copyright by CBX Software. All rights reserved.
The Customer is Always Right 14 No doubt the elements that go into getting products to market quickly and at a reasonable price are still important. But the biggest long-term factor of success for retailers and brands is the ability to innovate and provide consumers with the holy grail of what consumers want. This is an ever-moving target but includes the right products (on-trend), meeting product quality and social standards, pricing/value that makes sense and Amazon level service (question-free returns). Most importantly though, the pandemic has reinforced some marketing basics – retailers need to ensure customers can buy WHAT they want, WHEN they want it and WHERE they can get it – which increasingly means online. The Outlook for Global Trade in Q4 and Beyond No doubt the pandemic threw us for a loop, but the big question is what things will look like in the next quarter and next year. Recent reports from the International Monetary Fund (IMF) and the United Nations Conference on Trade and Development (UNCTAD) suggest that we are on the road to recovery through Q4 and into 2021, but it could be a rocky road. Despite what looks like a pandemic recovery, UNCTAD data showed a 5% drop in world trade in Q3 compared to the same quarter in 2019. This is certainly an improvement over Q2, which saw a 19% drop year-on-year, but overall global trade is still expected to contract by around 7-9% relative to 2019. While not great news, these numbers reflect a better than expected outcome, with manufacturing in Asia recovering quicker than expected and demand for products continuing strong in North America and Europe, possibly as people spent more on goods versus services. Asia is expected to fare better than the rest of the world, with the IMF forecasting a 2.2% contraction for 2020, based mostly on the greater impact from COVID-19 through Q3 on India, Malaysia, and the Philippines. China is one exception, with the IMF predicting growth of 1.9% for 2020 relative to 2019. Chinese exports plummeted in Q1 but picked up strongly through Q2 and Q3 and should reach year-on-year growth of around 10% (UNCTAD). Chinese imports also grew strongly through Q3, reaching 13% growth in September. The most dramatic decline in trade was in South and West Asia, where imports dropped by 23% and exports declined by 29%. Certain sectors such as energy and automotive were particularly hard hit, while other sectors such a communication equipment, office machinery, textiles and apparel had robust growth. Exports in medical supplies from China, the European Union, and the United States grew from an average of US $25 billion to $45 billion per month from January to May 2020 and 50% per month in subsequent months. The concern revealed by the UNCTAD data is that wealthy countries have more access to medical supplies, especially non-PPE products – for example, a vaccine. The report stresses that once a COVID-19 vaccine is created, it is important for developing countries to have equal access to ensure a faster global recovery. Q4 2020 Retail Sourcing Report
16 About CBX Software is the world’s leading Total Sourcing TradeBeyond is an exclusive community of retailers, Management solution provider, from concept, to suppliers, and brands coming together to streamline delivery – combining people, process and solutions. assortment planning, sourcing, quotations, and CBX helps retailers and brands streamline product buying. TradeBeyond is not a marketplace; it’s a development and sourcing, all the way through order & network and an app used by retailers to discover production. CBX empowers the supply chain network new exclusive products and by suppliers to get by driving collaboration to over 15,000 retail & supplier discovered and win more business! Visit www. partners and 30,000 users in more than 50 countries. tradebeyond.com For more information, visit www.cbxsoftware.com. Americas +1.858.264.1133 Asia +852.2378.6300 EMEA +49.89.9040.5110 Click below to learn more about how CBX Software can help! Request a Callback Request a Demo © 1995-2020 Copyright by CBX Software. All rights reserved.
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