Rising energy costs challenge European fashion industry
Forcing European steel mills and aluminum The energy crisis, with smelters closed, is now affecting the continent’s fashion industry. In 2022, due to the Russia-Ukraine conflict, concerns about cost pressures caused by inflation, and the energy crisis caused by the conflict, the operations of the European fashion industry will decline sharply. These crises continue to dominate the current economic situation. Thousands of small businesses and workshops that make products for well-known brands such as Gucci and H&M are seeing their business models unravel as local gas and electricity prices continue to soar in the wake of the Russian-Ukrainian conflict.
According to statistics from the European Textile and Clothing Association (Euratex), the energy cost of many textile companies has increased from 5% to about 25% of production costs, thus significantly reducing Margins, margins for textile manufacturers have shrunk.
Manufacturers say that energy prices have risen so much that power companies and energy companies, worried about losses, require textile companies to obtain bank guarantees or provide cash advances. to pay your energy bills in advance for the next few months.
Alberto Paccanelli, the owner of a textile factory in northern Italy, said that the current situation is that the entire European textile industry is facing the risk of bankruptcy. Paccanelli was shocked when the natural gas bill he received in July soared from 90,000 euros a year ago to 660,000 euros, a 6.3-fold increase.
Challenging environment
From consuming large amounts of electricity the bundles From spinning mills and weaving factories that convert wool into yarn, to printing and dyeing factories that use natural gas as power, the entire textile industry chain in Europe can feel the impact of the energy crisis. It is difficult for fabric manufacturers to pass on soaring costs to buyers.
The factory acts in good faith and is obliged to deliver the goods at the price agreed upon months ago. Once fabric prices rise, it may prompt many fashion brands and retailers to move their business to areas outside Europe where energy prices are lower. Suppliers pointed out that some brands have moved production to other countries such as Turkey, where production costs are lower.
Outlook
The current energy crisis and high inflation environment have The fashion industry poses a huge challenge. Some brands or companies that have endured it for decades may falter under these pressures. European countries are subsidizing corporate energy expenditures to ease the impact on businesses. For example, Germany announced approximately 300 billion euros in energy relief measures, including limiting the prices of electricity and natural gas. France plans to allocate 100 billion euros to deal with the energy crisis.
