core global sourcing update q3 2014 final
DESCRIPTION
The Core Solutions Global Sourcing Update provides insight and analysis into global sourcing information for retailers and brands. It covers topics such as currency exchange, wages, commodity prices, container shipping costs and much more.TRANSCRIPT
Global Sourcing Update
Facts & Insights
Produced by:
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FOREWORD
[GLOBAL SOURCING UPDATE] Core Solutions’ Global Sourcing Update provides research and analysis aimed at informing global sourcing and buying decisions for retailers, brands and other sourcing professionals. Each issue includes a snapshot of key information impacting global sourcing, such as economic conditions in sourcing countries, container shipping prices, currency exchange rates and commodity costs. We also cover hot topics ourselves and include insight from customers and analysts.
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Contents
Purchasing Manager’s Index ........................................................................................................ 3
Major Economic Indicators ........................................................................................................... 4
Global Competitiveness Index: Selected Indicators, 2013-14 (Ranking of 148 countries) ............ 5
China Minimum Wage Snapshot .................................................................................................. 6
Global Low Cost Sourcing Country Wage Snapshot .................................................................... 7
Container Freight Rates for Major Routes .................................................................................... 8
Currency Exchange Rates ......................................................................................................... 10
Global Commodity Rates ........................................................................................................... 11
Crude Oil ..................................................................................................................................... 11
Rubber ......................................................................................................................................... 11
Metals .......................................................................................................................................... 12
Wood ........................................................................................................................................... 13
Wool, Hides, Cotton .................................................................................................................... 13
Plastics and Fibers ...................................................................................................................... 14
Quality Focus ............................................................................................................................. 15
Topic Spotlight: The Promise of Myanmar .................................................................................. 17
CBX Sourcing Solution ............................................................................................................... 18
Next Steps ................................................................................................................................. 19
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Purchasing Manager’s Index 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.
A reading below 50 indicates contraction from the previous month, while a reading above 50
indicates growth. Currently 22 countries and regions conduct the PMI survey and compilation,
based on an internationally standardized methodology.
This update looks at a selection of emerging economies and key sourcing countries, providing
indicators for recent months (based on data provided by Markit)
Trend: Manufacturing conditions in most emerging economies continued to improve going into
the second half of the year, with some exceptions due to political or inflationary conditions.
China’s manufacturing has seen somewhat of a turnaround in recent months, supported by
government policy interventions to stimulate recovery.
COUNTRY May 2014
Jun 2014
Jul 2014
INDICATORS
Brazil 48.8 48.7 49.1 Output fell steadily for the fourth consecutive month as Brazil’s economy stagnated
China 49.4 50.7 51.7 Operating conditions are improving with exports and output at highest level since March 2013
Czech Republic
57.3 54.7 56.5 The Czech manufacturing sector experienced a strong performance going into the third quarter
Egypt 48.7 51.5 -- Egypt’s private sector experienced solid improvements in output, orders and exports heading in to 2H 2014
India 51.4 51.5 53.0 Business conditions in India improved for the ninth consecutive month on high demand
Indonesia 52.4 52.7 52.7 Indonesian manufacturers reported a solid improvement with increasing purchasing activity in recent months
Mexico 51.9 51.8 51.5 Some increase in production with a forecast of moderate growth on new exports from abroad
Poland 50.8 50.3 49.4 Polish manufacturing entered a downturn in second half of the year with drop in new orders
Russia 48.9 49.1 51.0 A marked improvement in the third quarter signaled a turnaround in Russian manufacturing
South Africa
49.7 49.5 -- Private sector output and new orders continued to contract with an impact of mining strikes
South Korea
49.5 48.4 49.3 Output and new business fell as Korea’s manufacturing sector and remained weak
Turkey 50.1 48.8 48.5 Turkey’s manufacturing sector remained in a downturn on falling new orders and output
Vietnam 52.5 52.3 51.7 Expansion of Vietnamese manufacturing continued with some slowing due to inflation and high oil prices
PMI Index Source: HSBC, Markit
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Major Economic Indicators The price index for US imports from China stayed high in June as China’s export growth
increased, rising to a 13-month high of 104.1 in May and in June, after registering 103.8 in
March and in April. Total value of deals signed at the 115th Canton Fair fell 2.0% from the
previous session. Global merchandise trade gained only 2.1% in 2013, predicted to rise at a
faster pace in 2014. Selected highlights:
Cambodia – Exports of textiles and garments rose by 9% by Q1 2014, with an agreement reached to annually review the garment sectors minimum wage Indonesia – Exports declined 3.2% yoy to reach US $ 14.3 billion in April, while new president, Joko Widodo, elected in July, is expected to turn things around Vietnam – Anti-China riots impacted production while a garment industry development plan for 2020 was approved, with a target of 65% localization of raw materials by 2020
CPI (% yoy growth)
Dec 2013
Jan 2014
Feb 2014
Mar 2014
Apr 2014
May 2014
Bangladesh 7.4 7.5 7.4 7.5 7.5 -
Cambodia 4.7 4.5 - - - -
India 9.9 8.8 8.1 8.3 8.6 -
Indonesia 8.4 8.2 7.8 7.3 7.3 7.3
Pakistan 9.2 7.9 7.9 8.5 9.2 -
Philippines 4.1 4.2 4.1 3.9 4.1 4.5
Thailand 1.7 1.9 2.0 2.1 2.5 2.6
Turkey 7.4 7.8 7.9 8.4 9.4 -
Vietnam 6.0 5.5 4.7 4.4 4.5 4.7 Exports (% yoy growth)
Dec 2013
Jan 2014
Feb 2014
Mar 2014
Apr 2014
May 2014
Bangladesh 10.5 7.8 6.4 4.8 16.0 -
Cambodia 43.7 - - - - -
India 3.5 3.8 -3.7 -3.2 5.3 -
Indonesia 10.3 -5.9 -2.5 1.2 -3.2 -
Pakistan 26.1 1.9 18.1 4.9 -10.0 -
Philippines 24.9 -3.0 11.6 12.4 1.3 -
Thailand 1.8 -2.1 2.3 -3.2 -1.0 -2.3
Turkey 4.6 8.3 5.7 12.4 - -
Vietnam 15.4 -0.8 13.8 14.8 18.9 15.9
Imports (%yoy growth)
Dec 2013
Jan 2014
Feb 2014
Mar 2014
Apr 2014
May 2014
Bangladesh 29.9 8.2 15.7 25.6 - -
Cambodia 26.8 - - - - -
India -15.3 -18.1 -17.1 -2.1 -15.0 -
Indonesia -0.8 -3.5 -9.9 -2.3 -1.3 -
Pakistan -2.5 9.9 6.4 -1.6 4.0 -
Philippines 2.7 24.7 1.7 10.6 3.0 -
Thailand -9.9 -15.5 -16.6 -14.2 -14.5 -9.3
Turkey 16.7 2.6 5.9 -3.0 - -
Vietnam 16.1 -5.5 12.6 12.9 12.2 10.3
Source: Fung Group, various statistical bureaus
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Global Competitiveness Index: Selected Indicators, 2013-
14 (Ranking of 148 countries)
The Global Competitiveness is a ranking of countries based on their competitiveness across
different measures such as government regulation, labor market efficiency, education,
infrastructure and other measures important to doing business in a country. Below is a selection
of emerging economies which are important sourcing locations. As might be expected, Countries
which made significant gains in the index include Bangladesh, Indonesia, the Philippines and
Vietnam, while China remained relatively flat.
Source: World Economic Forum
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China Minimum Wage Snapshot
Minimum wages may be set at the city, province or administrative unit and vary considerably (as
the 2013 wage map below indicates) - although the 2011-15 Five Year Plan stipulates an annual
increase of 13%. Actual increases have been in excess of 10% annually for more than a decade.
Source: China Briefing, Dezan Shira
2014 Minimum Wage Updates
Region Monthly Min Wage (RMB) Hourly Min Wage (RMB Effective Date
Shanghai 1,820 17 Apr. 1, 2014
Shenzhen 1,808 16.5 Feb. 1, 2014
Beijing 1,560 16.9 Apr. 1, 2014
Shandong Class A District: 1,500 Class A District: 15 Mar. 1, 2014 Class B District: 1,350 Class B District: 13.5
Class C District: 1,200 Class C District: 12
Shaanxi Class A District: 1,280 Class A District: 12.8 Feb. 1, 2014 Class B District: 1,170 Class B District: 11.7
Class C District: 1,060 Class C District:10.6
Class D District: 970 Class D District: 9.7
Chongqing Class A District: 1,250 Class A District: 12.5 Jan 1, 2014
Class B District: 1,150 Class B District: 11.5
Trends: By April 2014, minimum
wage increases were seen in
seven key economic areas of
China (as indicated in the table
above). It is expected that this
trend will continue through the
remainder of 2014, affecting
approximately 28 regions.
According to some analysts, wages
are expected to increase at a more
moderate rate of 8% in 2014
compared to 10% plus in previous
years. The labor market is
expected to remain tight with skill
shortages, an aging population and
less migrant workers. Studies show
that productivity among Chinese
workers is higher, which should
offset rising labor costs.
All four regions (central, north,
East, West) witnessed double
digit wage growth in 2013,
ranging from 13.5% to 16.0%
New Wage Agreements:
Shanxi – April 1, 2014
Qinghai – May, 2014
Yunnan – May 1, 2014
Sichuan – July 1, 2014
Jiangxi – July 1, 2014
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Global Low Cost Sourcing Country Wage Snapshot Below is a snapshot of minimum wages in key Asia sourcing locations, with the addition of Egypt
and Ethiopia. Wages often vary by region or province and in some cases might include costs
other than the base wage. In cases with a distinct variance, we provide an average. With greater
visibility into social conditions and increasing unrest and union pressure, wages in traditional low
cost sourcing countries are on the rise across the board.
Note: Consult Fair Wage Guide to calculate benchmarks for wages in particular countries on an
hourly or piece rate basis and determine a fair wage in those regions.
BANGLADESH CAMBODIA CHINA EGYPT ETHIOPIA
$68/month (Dec 1, 2013) US$ 83/month US$ 188/month US$ 105/month US$ 23/month
The minimum wage for entry level workers will increase by 77% to US$68/month from $38 per month. This includes: US$ 38.55 - basic wage US$ 15.42 – rent US$ 3.21 – medical US$ 2.57 - transport US$ 8.35 - food subsidy.
Breakdown US $ 55 – Regular + US $ 6 –living +US$ 10 – Attendance +US$ 5 – Health +US$ 7 – Transport Total = US$ 83 Wages expected to increase $20-40 in 2014.
Set locally, ranges from US$ 138 per month in Jiangxi Province to US$ 238 per month in Shenzhen, Guangdong Province. Wages increasing at least 10% per year.
Currently there is only one national minimum wage; there are no sectorial rates or occupation-based rates. Only one national rate: EGP 700
Some government institutions and public enterprises set their own minimum wages: public sector employees, earned a monthly minimum wage of US$ 23
INDIA INDONESIA LAOS MALAYSIA MYANMAR
US$ 60/month US$ 71-230/month US$ 79 per month US$ 297 per month US$ 65
From April 1, 2011 the Minimum Wage was raised to US$ 1.73 /day. Wages vary by region. US$ 2.18 per day in Bihar to US$ 3.40 per day in Haryana. The rupee hit an all-time low of 60.76 against the US dollar on 26 June.
Depends on region. 17 areas have different minimum wage. E.g. Jakarta: US$ 230 Solo: US$ 109 Central Java: US $ 71 Rupiah depreciated to new low: closed at 10,297 against the US dollar on 14 August
Expecting US$ 120 at end of June 2013 – negotiating Increase needed to offset migration to Thailand
US$ 79 per month; employers required to pay US$ 1 meal allowance per day.
70%-80% of textile workers are foreigners
US$ 297 per month on the Peninsula Malaysia, and US$ 261 per month for the states of Sabah, Sarawak, and Labuan
Rates vary widely.
Rate for day laborers is $0.50 per day. Min wage was temporarily increased to $65 per month pending approval of a new wage bill in late 2013.
PHILLIPPINES SRI LANKA THAILAND VIETNAM
US$ 190- 220 /month US$ 63 US$ 300/ month US$ 78 - 111 /month
Garments are made in 3 regions and wages range from $6-8 per day.
In 2013 minimum wages will be replaced with a two-tier system. 1
st tier: Minimum
floor wage for new hires/ low skilled. 2
nd tier: productivity
– based system. Manila - raise to 466 pesos (US$10/day) as of October
In the industrial sector, minimum wages are varied depending on the worker category. Semi-skilled: US$ 55 – US$ 63 Skilled: US$ 59 – US$ 75
Last increase was in April 2012, up 40% Automotive industry expansion means textile workers will migrate US$ 300 per month applies from 1
st Jan
2013
US$ 85 -95 per month (urban), US$ 67-74 per month (rural) for unskilled laborers at private enterprises Proposed min wage increase of US$ 12-19 (15-17%) per month as of Jan 2014
Sources: WageIndicator.org, SAFSA, Wikipedia
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Container Freight Rates for Major Routes
The rates below are supplied by The World Container Index - which reports actual spot
container freight rates for selected East-West trade routes – and Xeneta which relies on data
provided by shippers, allowing users to cross-reference prices. All indices are reported in USD
per Forty Foot Container. We report on historical and forward looking rates for key Asia-Europe
and Asia-U.S. routes.
Analysis: Demand for containerized freight has been strong in Europe and North America.
Despite and over-supply of freight shipping, container freight rates are not expected to drop
much in the coming year as economies continue to recover. Container shipping companies are
still struggling to make a profit due to overcapacity and a volatile global economic climate.
Source: www.worldcontainerindex.com
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Shanghai – Antwerp 40ft Market average: $2,021 Market low: $1,497
Hong Kong – Hamburg 40ft Market average: $2,759 Market low: $2,099
Shanghai – Rotterdam 40ft Market average: $2,124 Market low: $1,616
Source: www.xeneta.com
Source: www.xeneta.com
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Currency Exchange Rates
Following are exchange rates and indicators from 30 day to 2 year historical rates for major
currencies commonly factored into global sourcing costing estimations.
EURO to USD:
EURO to RMB:
USD to RMB:
EUR/USD - % change
2 years 8.86%
1 year 5.05%
6 months 0.00%
3 months -1.37%
30 days -0.07%
Source: Oanda
USD/RMB - % change
2 years -2.27%
1 year -0.30%
6 months 0.96%
3 months -0.12%
30 days -0.12%
Source: Oanda
EUR/RMB - % change
2 years 6.39%
1 year 4.74%
6 months 0.96%
3 months -1.49%
30 days -0.19%
Source: Oanda
The Euro declined against the USD through Q2, which is on a bullish trend, but is recovering as we head into Q3 2014.
The Euro has entered a weakening phase against all major currencies, including the RMB as the Euro zone recovery remains soft.
The Chinese Yuan appreciated slightly against the USD in the first half of 2014, which is expected to continue in the medium term.
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Global Commodity Rates Cotton prices have fallen markedly since April as the Chinese government is clearing large
stockpiles. Viscose staple fibers fell while PP prices rose over past three months. Crude oil
prices continue to be volatile, as uncertainty in the Middle East continue and global oil demand is
expected to outpace supply in the near term, putting downward pressure on prices. Metal prices
eased during Q2 2014 due to weakening demand from China.
Crude Oil
90
95
100
105
110
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Crude Oil , average of three spot prices:
Dated Brent, WTI and Dubai Fateh
95
100
105
110
115
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Oil - Dated Brent, light blend 38 API, fob
U.K., US$ per barrel
9698
100102104106108110
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-13
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Oil - Dubai, medium, fob Dubai
Fateh 32 API, US$ per barrel
85
90
95
100
105
110
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Oil - West Texas Intermediate 40 API,
Midland Texas, US$ per barrel
0
20
40
60
80
100
120
140
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4Rubber, Singapore Commodity Exchange,
No. 3 Rubber Smoked Sheets, US cents per
pound Rubber
Rubber price continue a downward
trend in Q3, despite modest recovery
in Q2. Oversupply of natural rubber is
expected to exceed 4 million tons in
the near term.
Commodity Price Sources: IMF data, Index
Mundi, Plasticker
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Metals
155160165170175180185
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-14
Ap
r-14
Ma
y-1
4
Metals Price Index, 2005 = 100, includes
Copper, Aluminum, Iron Ore, Tin, Nickel,
Zinc, Lead, and Uranium Price Indices
170017501800185019001950200020502100
Jun
-13
Jul-13
Au
g-1
3
Se
p-1
3
Oc
t-13
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Zinc, high grade 98% pure, US$ per metric
ton
19000
20000
21000
22000
23000
24000
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Tin, standard grade, LME spot price, US$
per metric ton
1500
1600
1700
1800
1900
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Aluminum, 99.5% min purity, LME spot
price, CIF UK ports, US$ per metric ton
1950
2000
2050
2100
2150
2200
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Lead, 99.97% pure, LME spot price, CIF
European Ports, US$ /metric ton
40
60
80
100
120
140
160
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
China import Iron Ore 62% FE spot (CFR
Tianjin port), US $ per metric ton
660067006800690070007100720073007400
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Copper, grade A cathode, LME spot
price, CIF Eur ports, US$ / metric ton
8000
10000
12000
14000
16000
18000
20000
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Nickel, melting grade, LME spot price, CIF
European ports, US$ per metric ton
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Wood
Wool, Hides, Cotton
0
50
100
150
200Ju
n-1
3
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Soft Logs Average Export price for
Douglas Fir, US$ per cubic meter
270
280
290
300
310
320
330
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Soft Sawnwood, average export price of
Douglas Fir, U.S. Price, US$ per cubic
meter
100
150
200
250
300
350
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-13
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Hard Logs, Malaysian meranti, import
price Japan, US$ / cubic meter
780800820840860880900920940
Jun
-13
Jul-13
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Hard Sawnwood, Dark Red Meranti, C&F
U.K port, US$ per cubic meter
900
950
1000
1050
1100
1150
1200
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Wool, Coarse, Australian Wool Exchange,
US cents per kg
900950
100010501100115012001250
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Wool, fine, Australian Wool Exchange, US
cents / kilogram
0
20
40
60
80
100
120
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Hides, Heavy native steers, wholesale
dealer's price, fob Shipping Point, US cents
/ pound
75
80
85
90
95
100
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-14
Ap
r-1
4
Ma
y-1
4
Cotton 'A Index', Middling 1-3/32 inch
staple, CIF Liverpool, US cents / lb
Q3 2014 - Global Sourcing Update CORESOLUTIONS
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Americas: +1.908.898.1880 Europe: +44.20.8133.0328 Asia: +852.2378.6300
Plastics and Fibers
A selection of plastic related prices is provided below. These are calculated from offer prices in
the Plasticker Material Exchange, which provide an indication of trends.
Analysis: Despite a modest recovery of plastic related prices in Q2, prices experienced a strong
downward trend going in the second half of the year. Volatility in oil prices, oversupply of various
plastics, along with weaker demand from China, are contributing to this trend.
1
1.1
1.2
1.3
1.4
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Jun
-14
Nylon - Price of PA 6.6
Regrind/ Flakes (Euros/kg)
0.4
0.45
0.5
0.55
0.6
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Jun
-14
Polyester - Price Development of PET
Regrind/ Flakes (Euro/kg)
0.60
0.65
0.70
0.75
0.80
0.85
0.90
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Jun
-14
ABS Price Development of ABS Regrind/
Flakes (Euro/kg
0.42
0.44
0.46
0.48
0.5
0.52
0.54
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-14
Ma
y-1
4
Jun
-14
PVC - Price Development of PVC-h
Regrind/Flakes (Euro/kg)
0.52
0.54
0.56
0.58
0.6
0.62
0.64
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Jun
-14
PP - Price Development of PP
Regrind/Flakes (Euro/kg)
0.5
0.55
0.6
0.65
0.7
0.75
Jul-1
3
Au
g-1
3
Se
p-1
3
Oc
t-1
3
No
v-1
3
De
c-1
3
Jan
-14
Feb
-14
Ma
r-1
4
Ap
r-14
Ma
y-1
4
Jun
-14
PS - Price Development of PS
Regrind/Flakes (Euro/kg)
Source: Plasticker
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Quality Focus
This new section of the Global Sourcing Update will focus on manufacturing/sourcing quality
related news and the impact on retailers and brands. This section is contributed largely by
AsiaInspection, a leading global provider of quality control services for businesses importing
from Asia, Africa, Southern Europe and Latin America.
Unrest Puts Increased Focus on Quality
Recent protests due to political tensions with China sent fear into supply chains, with Asia
Inspection figures showing that ordered inspections were 3.3 times higher than the average for
May 2013 to April 2014. This is due to increased concern from foreign buyers to ensure their
supply chain and quality has not been
disrupted. In Vietnam, textile and apparel
exports increased 18% year-on-year between
January and May, reaching $7.5 billion USD. In
the first half of the year apparel imports from
Vietnam into the US saw a 12.7% increase,
well ahead of rival China at 0.9%.
China is also experiencing unrest, as over
40,000 workers in the Dongguan province
engaged in one of the largest industrial
disputes in recent times. However China only
also saw a 10% increase in inspections in this
period, significantly lower than others in the
region. Chinese government stimulus efforts
have positively impacted manufacturing output going into the second half of 2014.
The largest inspections growth in Asia was in Cambodia, up 99% year over year, then
Bangladesh and Vietnam 73% each, India 63% and China 10%. In growth by industry category,
food and food container inspections were up 55% quarter over quarter globally.
Africa Gains Momentum
Ordered inspection growth in Asia remained strong
with 21% year over year growth. This was
surpassed by Africa with 31% inspection growth.
Interestingly, growth for inspections in Africa was
led by Swaziland which saw 50% growth in just the
last quarter. At the same time, Swaziland is losing
benefits from the United States under the African
Growth and Opportunity Act for its failure to make
progress towards internationally recognized
workers’ rights.
Q3 2014 - Global Sourcing Update CORESOLUTIONS
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Americas: +1.908.898.1880 Europe: +44.20.8133.0328 Asia: +852.2378.6300
Toxic Chemicals Found in Clothing
When the Australian Competition and
Consumer Commission (ACCC) randomly
screened for azo dyes in imported clothing in
March of this year, approximately 3%
contained carcinogens which may be
harmful to human health, resulting in the
voluntary recall of over 200,000 items from
stores, involving 37 product lines from
various retailers. Analyzing its own data,
AsiaInspection found that over 5% of all azo
dye lab tests in 2014 failed for exceeding the
legal minimum.
"Time and time again we see outsourced manufactured products putting consumers at risk. The
fact that 200,000+ products made it to store shelves containing a known cancer causing
carcinogen shows the need for stricter controls and testing at the source," said Sebastien
Breteau, AsiaInspection CEO.
Bangladesh Inspection Groups Raise Tensions
North American and European inspection groups 'The Alliance' and 'The Accord' are together
auditing 2,100 of Bangladesh’s 5,600 garment factories, employing some 4 million workers
accounting for 80% of the country’s exports. AsiaInspection 2014 data shows that for factories
that underwent ethical audits, 27% are
at serious risk and 59% are not
compliant.
The groups are involved in a debate
with stakeholders over the process by
which they shut non-compliant
factories. It’s feared that the
disruptions may contribute to slowing
export growth, with buyers turning to
sources they deem more stable, such
as China, India and Vietnam. While
the groups exist to protect workers,
there are practical issues at stake –
the protection of jobs and provision of
worker compensation during extended
shutdowns for repairs, often ordered
without notice. So far 14 factories have
been shut down and 5 have had their
operations limited.
Q3 2014 - Global Sourcing Update CORESOLUTIONS
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Topic Spotlight: The Promise of Myanmar Overview
In 2000, Myanmar was exporting approximately US $800 million in garments, just less than
Cambodia, mostly to the US. By 2004, US political sanctions eliminated most of the exports,
except for those to Japan and Korea. After a series of political and economic reforms in 2011,
Myanmar has transitioned gradually from military dictatorship to civilian rule, gaining increasing
attention from the rest of the world. With most of the economic sanctions removed by the US and
the EU in late 2012, the long isolated nation has begun to re-embrace the world, witnessing
strong influxes of foreign investments and international aid.
Developments
GDP - Has now accelerated to approximately 7.5% for 2013-2014
FDI - US $ 4.1 billion in foreign investment, mostly into the manufacturing sector.
Exports – Total of US 11.2 billion, an increase of 24.8% over the 2012-2013 fiscal year
Garment exports – Reached US $2.2 billion in 2013
Comparison to Cambodia – 2012 exports were 22.6% of Cambodia’s total
Population – 52.8 million (median age is 27.8)
Literacy Rate – 92.7%
Average Wage – US$70/month (Bangladesh is US$86) and Cambodia is US$101)
Active Unions – Approximately 600
Prominent Apparel Brands – H&M, GAP
Trade Preferences – ASEAN Free Trade Agreement, Generalized System of Preferences
Opportunities
- Large, young, literate working population
- Relatively low wage rates compared to other Asian
countries
- Abundant resources including forestry, metals,
- Strong strategic location
- Huge potential for industrial relocation
Challenges
- Low productivity – one 8 hour shift per day in a
factory (compared to 2-3 for other Asian countries)
- Low utilization of factory space
- Lack of machinery, electricity and transportation
infrastructure
- Inexperienced government and inadequate judicial
system and intellectual property laws
- No unified labor code, potential for significant labor
unrest
Q3 2014 - Global Sourcing Update CORESOLUTIONS
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Americas: +1.908.898.1880 Europe: +44.20.8133.0328 Asia: +852.2378.6300
About Core Solutions
Core Solutions (CORE) helps retailers, brands and suppliers streamline their supply chains, from
Concept to Delivery. CORE’s extended supply chain management platform (CBX) enables
organizations to drive greater speed, agility and efficiency and profit in bringing private label and
branded merchandise to market.
The CBX platform, offered as an on-premise system or cloud service, includes functionality for
Planning, Product Development, Buying, Sourcing, Order Management, Logistics and Finance.
CBX Sourcing Solution Provides automated request for quotes for one or more products.
Vendors receive email notifications and reminders automatically.
Vendors complete quotes online or via Excel interface.
Side-by-side quote comparison, with configurable Estimated Landed Cost (ELC)
What-If analysis enables staff to adjust cost components to refresh ELC.
Facilitates quote review, shortlisting and confirmation between buyers, category
managers and sourcing team.
Vendor can upload photos/images and product documentations (e.g., instructions,
certifications and 3rd party test reports)
Reduce overheads in issuing RFQs and processing quotes.
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Next Steps
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