The unprecedented energy crisis that has already led to the closure of steel an aluminium mills across Europe this year he is now spreading to an area that many people may not have paid much attention to the European clothing and textile industry.
 |
| This chart shows the energy inflation rates in the EU since 2018. |
Thousands of small factories and workshops supplying well known brands such as Gucci are now having to watch their business model collapse as local gas and electricity prices soared in the wake of the conflict between Russia and Ukraine.
According to the European clothing and textile federation, energy costs for many textile companies have reason from 5% to 15% of production costs, which has drastically cut into their profit margins. Textile mills that consumed large amounts of electricity to convert bills of wool into Yarm, two dyeing ills that use industrial printing and dyeing dryers powered by natural gas, the pain of the energy crisis is now being felt by entire textile chain in Europe. Textile owners fair to go bankrupt due to current energy crisis, some textile owner claims that their gas bill has increased from €90,000 to €500,000 in July itself.
In Europe, small and medium sized companies have often dominated the sector by forging close partnerships with design houses and mastered their specialisation over several decades. However, some deeply industrialised Areas of the textile industry can be vulnerable at the moment, including man made fibres, non woven, dying and finishing production. These sectors are currently being severely affected by high energy prices due to their direct dependence on gas and electricity.
If this textile where disappear from the European textile market, this would increase the EU’s dependence on foreign textile imports. Some of the textile companies provides key components in healthcare, construction Anne automotive sector, and are heavily dependent on energy for production.
The gas consumption of certain processes of these textile sectors cannot be replaced by other technologies such as dyeing and finishing. A year ago when textile manufacturers we’re just recovering from the COVID pandemic lockdown. Where already finding it difficult to observe the losses. Gas prices across Europe has raised nearly tenfold in the past year, reaching an unprecedented price peak in late August this year. Textile manufacturers have said that current energy prices have rising so high that utilities and other energy suppliers are even starting to ask textile companies to obtain bank guarantees and cash advances to pay their energy bills in advance for the coming month for fear of not getting paid.
In Italy, Europe largest textile producers and many manufacturers have also said they can no longer enter into long term energy purchase agreements that once insulated them, From short term price fluctuations. It is difficult for fabric manufacturers to simply pass on their high cost two buyers as the companies are obliged by pre-existing contracts to deliver goods at the price agreed before. Maximum manufacturers are already suffering huge losses from COVID pandemic now they are not in a position to pay in advance for the energy. The European textile industry’s nightmare. The range of issues surrounding energy spending has now even divided the industry landscape within Europe between those European countries struggling to insulate their industries from soaring gas prices and those that cannot afford to bear the burden.
Germany recently announced energy relief measures worth almost €300 billion, including price restrictions on electricity and gas. France is also planning to spend €100 billion on its own crisis response measures. By contrast, Italy, with its strong textile industry, may not have the financial resources to take similar measures. Italy is still saddled with a debt equivalent to 150% of GDP and incoming Prime Minister Giorgia Meloni has vowed to rein in public spending.
According to Brussels-based think tank Bruegel, Italy had allocated €59 billion (3.3% of GDP) at the end of September for measures to protect businesses and households from the energy crisis. Germany, meanwhile, has allocated €100 billion, or 2.8% of its GDP, while France has allocated €72 billion, or 2.9% of its GDP. Jean-François Pierre Gribomont, chairman of textile company Utexbel NV, said the divide was undermining the EU’s single goods market.
As an example, he said that his weaving business in Belgium costs 193 euros per megawatt hour, twice as much as a year ago. In France, on the other hand, the cost per megawatt-hour was €123, up 50 per cent from a year ago, thanks to government subsidies. “Why should we have a common Europe if every country is just sweeping its own snow,” he noted.
Michael Engelhardt, head of energy policy at Textil+Mode, Berlin’s textile and clothing industry association, said that German textile and fashion companies may benefit more from government aid than their counterparts in some other European countries, but that these companies still have to compete with other domestic industries for public funding. This also raises a new question: who can guarantee that subsidies for the textile industry will remain in place once the winter energy crisis has further intensified?
Some fabric manufacturers are already worried that if European governments are forced to restrict gas supplies this winter, they will have to wait at the back of long relief queues because their products are generally considered less important than other energy-intensive industries such as glass and metals. “People might say, ‘Look, even if you lack a new shirt, it’s not the end of the world, see?’” said Dirk Vantyghem, director general of the trade organisation Euratex. Of course, what may also be most worrying for the European textile industry at the moment is that the industry’s decades of accumulated advantages could be lost in one fell swoop.
A steady supply of cheap Russian gas has enabled manufacturers across Europe to prosper over the past decades, even in the face of increasing competition from abroad. But today, higher prices could prompt many fashion houses and retailers to move their operations outside Europe, where energy prices are lower. Some brands are already moving production to other countries with lower production costs, such as Turkey, rather than absorbing the extra costs in countries such as Italy, suppliers say.
Enrico Gatti, a wool manufacturer who supplies Zara, H&M and other well-known brands, said orders from him and other textile manufacturers based near Prato, had fallen by 50 per cent this year. Prato is a major textile centre in Italy.
According to data from the World Trade Organisation (WTO), Europe’s share of global textile exports has been steadily declining over the past 20 years. As of 2020, China’s share has quadrupled to over 40%, more than twice the EU’s share in 2020. So what really hangs in the balance at the moment are up to 1.3 million textile manufacturing jobs across the EU.
