We all remember it: one of the most visible effects of the pandemic was the surge in raw material prices, which in our industry translated into an exponential increase in the cost of cotton. In that moment, our role became finding the best way to manage an exceptional challenge to safeguard the work of both clients and suppliers. What we didn’t expect was that we could turn a major problem into an opportunity.
The years 2021 and 2022 were marked by significant uncertainty and consequent difficulties in market trends. Beyond its evident health-related impact, COVID-19 triggered a chain reaction that, from an economic perspective, resulted in skyrocketing raw material costs. Businesses across every industry faced prohibitive energy costs (electricity rose by 9.9% and natural gas by 15.3% as of July 2021), which profoundly affected production rhythms and results.
In textiles, this already complex situation was compounded by the dramatic increase in the cost of a material central to the entire production chain: cotton, whose value more than doubled in a very short time. For Calmonte, whose role involves facilitating the relationship between clients and producers, the challenge was to find a solution that would allow the former to keep their production volumes (and margins) as stable as possible while sparing the latter from complex renegotiations of already-signed contracts.
As expected, it wasn’t easy to reconcile these dual needs. However, our market knowledge and the strength of long-lasting relationships helped us meet the challenge. Upon reflection, in the most critical situations, one essential element often proves to be the greatest asset: experience.
During 2021 and 2022, the price of cotton fluctuated significantly on a weekly basis. However, our analysis revealed a semi-annual upward trend. Based on this insight, we secured significant raw material stocks at a fixed price, confident that prices would rise considerably in the following months.
This strategy hinged on strong relationships with our suppliers, who trusted that the material would be fully utilized for orders we considered realistic to anticipate. The results for our clients were overwhelmingly positive.
First, securing cotton at a lower price than its anticipated market value allowed them to sell their products competitively without sacrificing margins. Second, they avoided the unpleasant scenario of having to renegotiate contracts with suppliers, reducing the risk of unfulfilled orders—a common issue at the time due to continuous cost increases.
Thanks to our mediation with producers, who placed full trust in the order volumes we projected, and to the “reasonable” raw material prices, this risk was mitigated.
It would be presumptuous to claim we solved the challenges that the pandemic posed to the textile industry so violently. However, we can confidently say we enabled all stakeholders to work with greater peace of mind. For our clients, we offered the opportunity to remain active market players rather than falling victim to its restrictive dynamics.
This was only possible because of a cohesive supply chain built on mutual trust and respect—something worth emphasizing time and again.
