Major stakeholders of the apparel industry held high level discussions last week to formulate an action plan to mitigate the negative impact of the coronavirus on the industry.
“The preliminary discussions were attended by large scale members and we could not arrive at a constructive conclusion at the end of the day. However, we plan to meet again to ascertain the situation and consider measures to overcome the difficulties we face at present as well as in the future,” Secretary General, Apparel Exporters Association Forum Tuli Cooray said.
The sector is struggling with both disrupted supply chains and slower demand in key export markets with initial estimates indicating the impact could reach as much as $ 500 million.
“We are open for discussions and are also seriously looking at supporting the apparel SMEs as the loss of sub contracts will crunch the demand which will be a big blow to the sector. We are planning our inventories to be sufficient for the next two weeks as after the Chinese new year, China commenced production on February 14 and will continue to supply for two to three weeks. However, due to working capital requirements, the inventory levels cannot be increased,” he said.
Government support is vital for the industry, but the question is at what level it could reach the value chain.
“We should be able to get flexible solutions from the Government to overcome this difficult situation as the virus has affected both the supply and demand side.
Though the production cycle was extended beyond the period, the continued supply of fabric was not there. With signs that China is returning to normalcy, we expect the resumption of activities soon, he said.
With disruption to the production, many industrialists are unable to meet the cost to sustain operational expenses and the future of the workforce depends on the fast recovery of China and the ending of the coronavirus epidemic. The companies are concerned about the fallout from the supply chain due to disruptions. The factories are likely to be closed for a longer period in April as supplies will cease.
“The original impact of the coronavirus outbreak was on the supply of raw materials. There have been some major delays in shipments for supplies from China and the impact has been different from factory to factory and customer to customer. This has also resulted in a backlog, which is further impeding the local apparel industry, “ he said.
The impact may be felt until mid-May or even beyond May and there is a lot of uncertainty within the industry regarding the impact of the coronavirus outbreak. While alternative sources for raw materials seems like a solution, but there were certain limitations to this. It takes a long time to develop those sources and technology. In some instances, alternative sources for certain raw materials cannot be found outside China, he said.
“The limited supply of raw material will be further impacted due to space crunch , congestion and additional charges. The mobility curtail also could not be avoided. Our estimates are that there will be an impact of a 30 per cent drop in orders from this region. We don’t know exactly what the impact will be,” he said.
“We feel that this is a short term phenomena. Once China stabilises, this will go off. We also need to explore the opportunities presented by the virus as all the negative effects are short term. The final proposal document with special emphasis on the SME sector will be finalised shortly,” he said.
The $ 5 billion industry counts on the US and UK as its two largest export markets.