Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire

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Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
Q4
                     2020

Retail Sourcing Report
Facts & Insights

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Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
1

    FORWARD

    RETAIL SOURCING REPORT

    CBX Software’s Retail Sourcing Report provides
    research and analysis aimed at informing global
    sourcing and buying decisions for retailers, brands
    and other sourcing and supply chain professionals.
    Each issue includes a snapshot of key information and
    trends impacting global sourcing, such as economic
    conditions in sourcing countries, container shipping
    trends, currency exchange and commodity rates. We
    also cover hot topics ourselves and include insight
    from analysts and other experts.

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Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
2

CONTENT

RETAIL SOURCING REPORT                               0
FORWARD                                              1
MANUFACTURING OUTLOOK (PMI)                          3
LOW COST COUNTRY SOURCING (LCCS) HIGHLIGHTS          4
     SOUTH EAST ASIA                                 4
     SOUTH AND WEST ASIA                             5
CHINA MINIMUM WAGE TRENDS                            6
LOW-COST COUNTRY SOURCING WAGE TRENDS                7
CONTAINER FREIGHT RATES & TRENDS                     8
TRADE CURRENCY RATES & TRENDS                        9
GLOBAL COMMODITY RATES & TRENDS                      10
     CRUDE OIL                                       10
     RUBBER                                          10
     METALS                                          10
     COTTON                                          11
     PLASTICS AND SYNTHETIC FIBERS                   11
QUALITY CONTROL INDICATORS                           12
FOCUS TOPICS                                         13
     COVID-19, E-COMMERCE ACCELERATOR                13
     THE OUTLOOK FOR GLOBAL TRADE IN Q4 AND BEYOND   14
ABOUT CBX SOFTWARE & TRADEBEYOND                     15
Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
3        Purchasing Manager’s Index (PMI)

         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. Over 30 countries and regions participate in various PMI surveys.
                                                                                                                 4

         Manufacturing             Outlook (PMI)
         A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates growth.
         This update looks at a selection of emerging economies and key sourcing countries, providing indicators for
         recent months based on data provided by IHS Markit, NIKKEI, CAIXIN and other sources.
       To help understand industry and economic conditions in a country, the Purchasing Manager’s Index (PMI)
       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. While over 40 countries and economic
Q4   2020  News
       regions     and Analysis:
               participate in various PMI surveys, this update looks at a short-list of emerging economies and key
       sourcing countries to provide indicative trends. (Data Source: IHS Markit)
As businesses reopened and consumer demand picked-up following lockdowns and closures due to the
pandemic,
        Q4 global  manufacturing
            2020 Summary:           rebounded
                             As businesses       throughand
                                             reopened    Q3consumer
                                                             and into Q4  as output,
                                                                        demand        exports
                                                                                 picked-up      and new
                                                                                            following    orders expanded
                                                                                                      lockdowns    and
to one of the highest levels since 2018. The upcoming Christmas season also pushed trade flow and stretched
        closures due to the pandemic, global manufacturing rebounded through Q3 and into Q4 as output, exports
global supply chains still recovering from the impact of Covid-19. While input costs have reached record levels,
        and new orders expanded to one of the highest levels since 2018. The upcoming Christmas season also
businesses felt more confident about the coming year. Overall the global trend was recovery and growth, with
        pushed trade
some exceptions       flowasand
                    such        stretched
                             Mexico,       global supply
                                       Indonesia,        chains
                                                   Malaysia  andstill recovering
                                                                  Myanmar,       from economies
                                                                              whose    the impact of  Covid-19.to
                                                                                                   continued    While
                                                                                                                   contract
under the impact of the pandemic. The economic picture for 2021 is still unclear, given the potentialthe
        input costs have  reached  record levels, businesses felt more  confident about  the coming  year. Overall  of new
        global
outbreaks      trend
           across    was recovery
                   Europe   and NorthandAmerica.
                                         growth, with some exceptions such as Mexico, Indonesia, Malaysia and
         Myanmar, whose economies continued to contract under the impact of the pandemic. The economic picture
         for 2021 is still unclear, given the potential of new outbreaks across Europe and North America.

                       Jul    Aug     Sep
           Country                            Summary of Indicators
                      2020    2020    2020
                                              Brazilian manufacturing continued to recover at pace, supported by a weaker local
          Brazil      58.2    64.7    64.9
                                              currency; new orders, production and exports saw record growth, despite higher costs.
                                              Chinese manufacturers maintained their robust growth momentum through Q3, with
          China       52.8    53.1    53.0
                                              new business growing at the fastest rate since 2011.
                                              Columbia’s manufacturing economy continued to improve in Q3, despite easing off in
          Columbia    54.2    51.2    50.4
                                              September as quarantines eased, resulting in output growth and optimism for 2021.
          Czech                               Manufacturing in Czechoslovakia continued to improve through Q3 as domestic and
                      47.0    49.1    50.7
          Republic                            export orders and production increased, while competition pushed input costs lower.
                                              India’s economy rebounded strongly through Q3, as factories ramped up production
          India       46.0    52.0    56.8
                                              and increased headcount to fill new orders, following 6 months of contraction.
                                              Indonesia’s manufacturing had a setback in September following new outbreaks of
          Indonesia   46.9    50.8    47.2
                                              Covid-19, with new lockdowns limiting production, employment and purchasing.
                                              Malaysia saw some pullback in manufacturing activity in late Q3 following an initial
          Malaysia    50.0    49.3    49.0
                                              rebound from the pandemic effect, with businesses confident for a stronger 2021.
                                              Mexico’s manufacturing continued to feel the impact of Covid-19 through Q3 and into
          Mexico      40.4    41.3    42.1
                                              Q4 as many businesses remained closed, yet businesses confidence remains high.
                                              Manufacturing came to a standstill in September after new lockdowns measures were
          Myanmar     51.7    53.2    35.9
                                              enforced, reducing output and headcount, making for an uncertain end to the year.
                                              Despite easing off in Aug/Sept, Polish manufacturing improved marginally though Q3
          Poland      52.8    50.6    50.8
                                              reflecting growth in employment, despite weakness in output and new orders.
                                              In line with other economies that saw a rebound in Q3, then a drop-off in September,
          Russia      48.4    51.1    48.9
                                              Russia’s production sector lost momentum into Q4 with uncertainty for the new year.
          South                               Easing of South Africa’s lockdowns in Q3 resulted in growth in output, new orders,
                      44.9    45.3    49.4
          Africa                              employment and purchasing, as companies attempted to recoup pandemic losses.
          South                               Manufacturing in South Korea stabilized through Q3 as businesses reopened and
                      46.9    48.5    49.8
          Korea                               output grew; ongoing recovery will depend on both domestic and foreign demand.
                                              Turkey’s manufacturing sector saw a sustained recovery through Q3, with further
          Turkey      56.9    54.3    52.8
                                              gains in output and new orders, along with job creation and optimism for 2021.
                                              Vietnam’s manufacturing economy picked up in September from the effects of
          Vietnam     47.6    45.7    52.2
                                              lockdowns in Q3, with output growth and stronger business confidence for 2021.

     © 1995-2020 Copyright by CBX Software. All rights reserved.
                                                                               Q4 2020 Retail Sourcing Report
Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
Low Cost Country Sourcing (LCCS) Highlights                                                                       4

This section looks at selected issues impacting sourcing from key LCCS destinations based on data available at the
time of printing the report, alongside official import/export numbers highlighting global sourcing trends.

Summary: Asian economies continue to be heavily impacted by pandemic lockdowns, given they rely on trade with
each other as much as they do on consumer product exports to Western countries. Garment producing countries such
as Bangladesh and Cambodia continue to be hard hit by cancelled orders and factory shutdowns which have resulted
in mass unemployment and social unrest. The only Asian countries who are seeing growth, now and into 2020, are
China and Vietnam.

South-East Asia

Cambodia – Cambodia’s garment workers turned to the streets to protest the sudden loss of income due to Covid-19
factory related closures. Over 200 factories have closed, thousands of workers receiving dismissal notices and no
severance pay – in violation of labor laws. The garment sector in Cambodia employs over 800,000 people, mostly
women at an average wage of US$ 190/month ($1.30 an hour).

Indonesia – Indonesia is another country hit hard by the pandemic, with over 400,000 cases, leading to shutdowns and
mass unemployment. The Indonesian government passed a new law in October opening the door to labor intensive
manufacturing and foreign investment, aimed at creating jobs. Labor-intensive industry makes up less than 2% of
Indonesia’s GDP, much lower than other Asian countries.

Philippines – The Philippines continues to experience a severe fallout from the pandemic with the International
Monetary Fund (IMF) predicting a GDP contraction of 8.3% in 2020. To put it in context, Asian economies together are
projected to contract by 2.2%. This is the sharpest projected contraction among South-East Asian countries. As of mid-
October, the Philippines had almost 350,000 COVID-19 cases.

Thailand – In mid-October, Thailand’s new central bank governor predicted that the country’s economic recovery is
expected to take at least 2 years to reach pre-pandemic levels. He warned that Thailand, South-East Asia’s second
largest economy, could contract by a record 7.8% in 2020, partly due to the heavy impact of tourism. Anti-government
protests are also reportedly limiting consumption and business confidence

Vietnam – Aside from China, Vietnam is one of the only Asian economies to report economic growth in Q3 and into the
busy Christmas and 2021 pre-Chinese New Year season. Vietnam’s GDP rose by 2.62% in Q3, with exports increasing
11%, partly due effective management of the pandemic through strict lockdowns allowing for rapid business
reopening. Vietnam also continues to benefit as manufacturers shift from China.

                                                  Q4 2020 Retail Sourcing Report
Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
5
        South and West Asia

        Bangladesh – Manufacturing in Bangladesh continues to bear the impact of the pandemic, with order
        cancellations and factory closures resulting in layoffs and tough times for garment workers living on already
        sub-standard wages. According to the Bangladesh Garment Manufacturer’s and Exporters Association
        (BGMEA), 1,150 factories have been impacted, with $3.18 billion in pandemic related order cancellations.

        India – India continues to be hit hard by the pandemic with around 8 million cases and over 100,000 deaths
        by mid-October. While average daily numbers are on the decline, India is still the worst affected country
        after the US. Given the substantial number of potential cases in a population of 1.3 billion, the government
        has enforced lockdowns to some extent, but is also trying to balance the economic fallout of halting the
        economy.

        Pakistan – Despite a relatively low-number of Covid-19 related deaths, Pakistan’s economy is still set to
        contract through 2020. To stimulate their economy and create jobs, the Pakistani government is pushing
        hard for the $6.8 billion, 2.655 ML-1 railway project, part of the China-Pakistan Economic Corridor that will
        connect Karachi in the South to Peshawar in the North. This project will be 90% funded by Chinese loans.

        Turkey – Turkey’s COVID-19 death toll reached 10,000 in mid-October with almost 370,000 cases, with new
        lockdowns in place as the country fights off a second wave. While Turkish President Erdogan focused on
        pushing a political agenda across the Muslim world, the Turkish economy went into a free-fall, with the lira
        falling to record lows against the USD, inflation at 11.7% in Q3 and economic growth reached a 10-year low.

                       Sources: News Reports, Statistical Bureaus, Li & Fung Group (charts)

    © 1995-2020 Copyright by CBX Software. All rights reserved.
Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
China Minimum Wage Trends                                                                                                                              6

  Q4 2020 News & Analysis:

   It is almost redundant to still look at individual Chinese provinces and regions for the purpose of finding an edge
  in labor cost. For more than a decade the Chinese central government has pushed their economy away from
  labor intensive industry towards higher value production and focused on growing domestic consumption versus
7 exports. Despite this policy exports grew strongly in Q3 and should continue to grow through Q2, 2022 assuming
  the pandemic recovery trend continues.
 China Minimum Wage Trends
  Since 2005, the Chinese economy has grown from $2.3 trillion in GDP to $14.4 trillion in 2019, with average
  annual income increasing by at a similar ratio from $1750 to over $10,000. As China’s leaders sit down for
 Q4 2020 News & Analysis: It is almost redundant to still look at individual Chinese provinces and regions for the purpose of finding
  their
 an edge next
          in laborfive-year    plan,
                   cost. For more  than we   canthe
                                        a decade  beChinese
                                                      sure central
                                                             that government
                                                                    similar policies
                                                                                has pushed oftheir
                                                                                               managing      growth
                                                                                                   economy away          will
                                                                                                                 from labor    mean steadily increasing
                                                                                                                            intensive
  minimum
 industry towardswages      across
                    higher value       China’s
                                 production      provinces
                                            and focused       anddomestic
                                                        on growing   regions. consumption versus exports. Despite this policy exports
 grew strongly in Q3 and should continue to grow through Q2, 2022 assuming the pandemic recovery trend continues.

 Since 2005, the Chinese economy has grown from $2.3 trillion in GDP to $14.4 trillion in 2019, with average annual income increasing
 by at a similar ratio from $1750 to over $10,000. As China’s leaders sit down for their next five-year plan, we can be sure that similar
  Note:ofThese
 policies   managing   are  official
                         growth        wage
                                will mean       guidelines
                                          steadily              mandated
                                                   increasing minimum           by each
                                                                       wages across   China’sprovince
                                                                                               provinces andorregions.
                                                                                                                region based on information     publicly
  available    as   of  Oct   1, 2020.     As   such   these   numbers       serve   as   an   indicator.    Actual     wages
 Note: These are official wage guidelines mandated by each province or region based on information publicly available as of Oct 1,
                                                                                                                                   may include benefits,
  food,
 2020. Ashousing      etc. Minimum
          such these numbers   serve as anwage     isActual
                                           indicator. typically
                                                            wages40-60%
                                                                 may includeofbenefits,
                                                                                average food,total  wage.
                                                                                              housing etc. Minimum wage is typically
 40-60% of average total wage.

                                          2020 Minimum Wage Updates (official)
                                  Monthly Min Avg Wage
   City/Region/Province                                           Increase %                      Official Update
                                  (RMB)
   Anhui                          1,550                           20.6%                           Nov 1, 2019
   Beijing                        2,200                           3.8%                            Jul 1, 2019
   Fujian                         1,800                           7.4%                            Jan 1, 2020
   Chongqing                      1,800                           20.0%                           Jan 1, 2019
   Gansu                          1,620                           10.2%                           Jun 1, 2019
   Guangxi                        1,680                           16.7%                           Jan 1, 2020
   Guangdong                      2,200                           12.3%                           Jul 1, 2019
   Guizhou                        1,790                           6.6%                            Dec 1, 2019
   Hainan                         1,670                           12.6%                           Feb 1, 2019
   Heilongjiang                   1,680                           15.4%                           Oct 1, 2019
   Henan                          1,900                           8.2%                            Oct 1, 2018
   Hebei                          1,900                           14.8%                           Nov 1, 2019
   Hubei                          1,750                           13.1%                           Nov 1, 2019
   Hunan                          1,700                           13.6%                           Oct 1, 2019
   Inner Mongolia                 1,760                           8.0%                            Aug 1, 2019
   Jiangsu                        2,020                           8.1%                            Aug 1, 2018
   Jiangxi                        1,680                           15.1%                           Jan 1, 2019
   Jilin                          1,780                           22.5%                           Oct 1, 2019
   Liaoning                       1,810                           7.6%                            Nov 1, 2019
   Ningxia                        1,660                           12.4%                           Jan 1, 2019
   Qinghai                        1,700                           15.2%                           Jan 1, 2020
   Shaanxi                        1,800                           7.0%                            May 1, 2019
   Shandong                       1,910                           6.7%                            Jun 1, 2018
   Shanghai                       2,480                           2.5%                            Apr 1, 2019
   Shenzhen                       2,200                           4.9%                            Jul 1, 2018
   Sichuan                        1,780                           7.1%                            Jul 1, 2019
   Tianjin                        2,050                           5.1%                            Jul 1, 2019
   Tibet                          1,650                           17.8%                           Jan 1, 2019
   Xinjiang Uyghur                1,820                           12.9%                           Jan 1, 2019
   Yunnan                         1,670                           10.6%                           May 1, 2019
   Zhejiang                       2,010                           8.4%                            Jan 1, 2019

                                                                   Q4 2020 Retail Sourcing Report
 © 1995-2020 Copyright by CBX Software. All rights reserved.
Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
7       Low-Cost Country Sourcing Wage Trends

        Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt,
        Ethiopia, and Turkey to give a comparative view. Wages vary by region or province and indicate either
        an estimated or actual/official rate. In cases with a distinct variance, we provide an average.8 Currency
        fluctuations mean that these figures are approximate at the time of finalizing this report.
        Low-Cost Country Sourcing Wage Trends
        Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt,
Q4 2020   News & Analysis:
     Ethiopia, and Turkey to give a comparative view. Wages vary by region or province and indicate either an
        estimated or actual/official rate. In cases with a distinct variance, we provide an average. Currency
With no clear horizon for the end of COVID-19, there is little cause for optimism on the labor front in low cost
        fluctuations mean that these figures are approximate at the time of finalizing this report.
sourcing countries, in some cases the gains in compliance and the movement towards a living wage might
be going backwards. While Bangladesh approved a wage increase for leather goods and footwear workers,
        Q4 2020 News & Analysis: With no clear horizon for the end of COVID-19, there is little cause for optimism
the first for them since 2013, Indonesia is pushing ahead with a controversial Omnibus Bill aimed at relaxing
        on the labor front in low cost sourcing countries, in some cases the gains in compliance and the movement
business, labor, and environmental laws to encourage foreign investment and create more labor-intensive jobs
        towards a living wage might be going backwards. While Bangladesh approved a wage increase for leather
with minimum wages set by regional governors. Similarly, workers in low-cost countries such as Cambodia and
        goods and footwear workers, the first for them since 2013, Indonesia is pushing ahead with a controversial
Myanmar face an uncertain future until the pandemic ends.
        Omnibus Bill aimed at relaxing business, labor, and environmental laws to encourage foreign investment and
        create more labor-intensive jobs with minimum wages set by regional governors. Similarly, workers in low-
        cost countries such as Cambodia and Myanmar face an uncertain future until the pandemic ends.
        Note: Figures are provided in USD/month based on currency exchange as of Oct 1, 2020. Minimum wage
        Note: Figures are provided in USD/month based on currency exchange as of Oct 1, 2020. Minimum wage
        policies are updated as per data available at the time of finalizing this report and are based primarily on
        policies
        unskilledarewages.
                     updatedConsult
                             as per data available
                                     sources  suchatastheFair
                                                          timeWage
                                                               of finalizing
                                                                     Guide this  report and are based
                                                                             or Wageindicator.org   toprimarily
                                                                                                       assess onand calculate
        unskilled wages. Consult sources  such as  Fair Wage  Guide  or Wageindicator.org
        benchmarks for wages in particular countries and regions not covered here.         to assess and calculate
        benchmarks for wages in particular countries and regions not covered here.

         BANGLADESH                CAMBODIA                   CHINA                    EGYPT                      ETHIOPIA
         $95 (Sep 2020)            $190 (Jan 1, 2020)         $163-$359 (Jan 2020)     $116 (April 2019)          $26 (Jan 2015)
         As of September 2020,     Cambodia announced         Minimum wages in         Egypt raised their         Ethiopia is still
         the Bangladesh            an increase to their       China are set by local   minimum age to 2000        working on a system
         Ministry of Labor and     minimum wage from          governments and have     Egyptian pounds ($116)     to determine a
         Employment approved       US$182, to $190 a          varying wage formulas    from 1200 pounds,          minimum wage for the
         a 94% minimum wage        4.4% increase, to take     (with housing, food,     applying to all workers,   private sector. Entry
         increase for leather      effect from January 1,     overtime etc.)           with higher increases      level wages in the
         goods and footwear        2020. Political and        Actual 2020 wages for    going to the private       textile sector range
         workers from 3,652        labor tension              manufacturing jobs in    sector. This increase      from $35 to $40. The
         taka (2013) to 7,100      continues as               China are much higher    came ahead of a June       base minimum wage
         taka (US $85).            opposition push for        at US$870/month          30, 3029 target date.      is officially
                                   more rights and pay.                                                           $18/month.
         INDIA                     INDONESIA                  LAO PDR                  MALAYSIA                   MYANMAR
         $94-$236 (Oct 2020)       $120-$298 (Oct 2020)       $124 (May 2018)          $270-$295 (Jan 2019)       $80 (Mar 2018)
         The Indian Parliament     As of Q4 2020,             The Lao Government       Malaysia implemented       Myanmar revised its
         is in the process of      Indonesia is working to    approved an increase     a nationwide minimum       minimum wage from
         reforming labor           finalize a controversial   in minimum wage from     wage of RM 1,100 as of     K600 ($2.70) per day
         policies. By September    Omnibus Bill focused       Kip 900,000 (US$107)     January 2019. Wages        to K4,800 (3.60) or
         of 2020 3 of 4 labor      on creating jobs in        to Kip 1,100,000         vary by region and are     K600/ hour for an
         bills passed through      labor heavy industries,    (US$142)) in key         supposed to be             eight-hour workday in
         and await final           to create jobs and         provinces which took     reviewed every 2 years.    2018. This is increase
         approval from the         incentivize foreign        effect in May 2018.      The new directive is       of 33%, mostly affects
         Indian President.         investors.                                          being enforced widely.     garment workers.
         PHILLIPPINES              SRI LANKA                  THAILAND                 TURKEY                     VIETNAM
         $132-$190 (Jan 18)        $67 (Mar 2016)             $248-$265 (Apr 1/18)     $482 (Jan 2020)            $132-190 (Jan 1/19)
         Wages in the              Sri Lanka adopted two      Thailand is in the       To combat inflation of     Vietnam announced
         Philippines vary by       laws on minimum            process of updating      close to 12%, Turkey       they will increase their
         region, skill level and   wages as of early          their minimum wage       announced a minimum        minimum wage by
         wage classification.      2016, mandating a          from a current           wage increase of 15%,      5.3% in 2019. This
         Negotiations are still    minimum wage of Rs         minimum of 308 – 330     effective Jan 1, 2020 to   increase was relatively
         underway, but Manila      10,000 (+/- $67) and       Baht per day to a        2,324 liras/month          lower than the 2018
         for example saw a 21      an increase of Rs          proposed 400 Baht per    (US$381) net. This         increase of 6.5%.
         Peso ($0.42) increase     2,500 (+/-f$17) for        day. Most businesses     brings the gross           Wages range from
         in their daily wage to    workers earning less       are opposed to this      minimum wage (before       $125-$180 / month
         491 Pesos ($9.82) in      than Rs 40,000 per         higher wage as being     deductions) to 2,943       across 4 key regions
         Q4 2017.                  month (+/- $270)           too high.                liras/month (US$482).      in Vietnam.

         Sources: WageIndicator.org, SAFSA, Local News Reports
                                                       Q4 2020 Retail Sourcing Report

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Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
Container Freight Rates & Trends                                                                                 8

  Q4 2020 News and Analysis:

  While spot rates on major East-West shipping routes have climbed higher through Q2 and Q3, carrier service
  levels and on-time arrivals of container ships has plummeted. Through late Q3, carrier reliability was below 50%
  on shipments from Asia to US East and West Coasts and down 69% for Asia-North Europe. Container ships were
  on average five days late in September, according to Sea-Intelligence Maritime Analysis. Carriers have continued
  to reduce capacity through the pandemic, which has kept prices high but left importers frustrated. Importers are
  also dealing with port congestion and unpredictability in inventory forecasting and replenishment. With concern
  over a second wave of Covid-19 and economic and political uncertainty in the US and Europe, container shipping
  rates and service are unlikely to improve until well into 2021, if at all.

Asia - North Europe Trade Lanes

Asia-North Europe container shipping rates have
continued to increase through 2020, based on limited
capacity and strong demand, especially following
pandemic shut-downs and approaching the busy
Christmas and pre-Chinese New Year season.

Container shipping rates are expected to remain high
given that carriers are carefully managing capacity
below the level of demand to protect their interests.
According to Sea-Intelligence, shipping volumes on
Asia – North Europe routes were up 2% year-on-year in
July to 1.5 million TEU.

Asia – North America Trade Lanes

Both East and West coast US spot container shipping
rates reached annual highs in Q3 and continue to climb
into Q4. Similar to Asia-North Europe lanes, carriers
cut capacity by blanking sailings from Asia to North
America during the first half of 2020 (the pandemic),
but as demand increased, they have not reintroduced
sufficient capacity.

Heading into the peak Chr istm as seaso n and
subsequent peak pre-Chinese New Year period, the
current trend in shipping rates/capacity is most likely to
continue. Reports show that consumer goods spending
is up dramatically, driven by e-commerce growth and by
consumer’s shifting spend from services to goods such
as furniture, home office, exercise and other products
which should continue to drive demand for shipping.

 Sources: IHS Markit, Joc.com, Alphaliner, SeaIntel

                                                     Q4 2020 Retail Sourcing Report
Retail Sourcing Report - Facts & Insights - Q4 2020 - Newswire
9       Trading Currency Rates & Trends

       Following are exchange rates and indicators for major currencies commonly factored into global sourcing
       costing estimations. The fallout from Covid-19 has extended to foreign exchange with many investors selling
       currencies in countries that are hard hit with the virus and placing their assets in safe-haven currencies
       – especially the US dollar. The dollar is likely to hold11 strong since there are few alternatives, given the
       Euro’s limited role as a reserve currency and the fact that the Chinese Renminbi is still tightly controlled.
    11
                                                                11Trading Currency Rates & Trends
       Currency volatility continues to impact purchasing, resulted    in higher costs and threatening margins. Other
       factors driving volatility are the upcoming US election, uncertainty over future stimulus packages, the Brexit
        Tradingongoing
       negotiation,  Currency          Rates
                              uncertainty        & Trends
                                           with US/China trade andFollowing
                                                                   the potential  resurgence   of Covid-19
                                                                                                   indicatorsthis Winter.
                                                                                   Trading Currency Rates & Trends
                                                                            are exchange rates and            for major currencies comm
                                                                            costing estimations. The fallout from Covid-19 has extended to foreign ex
       Following are exchange rates and indicators for major currencies commonly factored into global sourcing
                                                                            currencies in countries that are hard hit with the virus and placing their
       costing estimations. The fallout from Covid-19 has extended to foreign       exchange
                                                                              Following    areUS with manyrates
                                                                                                 exchange      investors
                                                                                                                     and isselling
                                                                                                                           indicators     for major  currencies   comm
                                                                            especially    the       dollar. The dollar         likely to hold   strong  since there  are
           CBX Software
       currencies                 helps
                    in countries that      you
                                      are hard hit stay
                                                   with theup   toand
                                                            virus  date    with
                                                                      placing   theirchanging
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                                                                                       assets
                                                                                        estimations.
                                                                                      role  as a reserve trading
                                                                                                 in safe-haven     currencies
                                                                                                         Thecurrency
                                                                                                              fallout  from         –
                                                                                                                         and Covid-19       has the
                                                                                                                                the fact that   extended
                                                                                                                                                    Chineseto foreign
                                                                                                                                                              Renminb e
       especially the US dollar. The dollar is likely to hold strong since there    are fewinalternatives,
                                                                              currencies        countries      given
                                                                                                             that  arethe
                                                                                                                        hardEuro’s
                                                                                                                                hit Learn
                                                                                                                                     with   More
                                                                                                                                           the virus and  placing  thei
           policies
       limited  role as and   new
                        a reserve   tariffs
                                  currency andrule  with
                                                the fact    our
                                                         that the AI sourcing
                                                                  Chinese Renminbi   solution.
                                                                            volatility
                                                                              especially
                                                                                        continues to impact purchasing, resulted in higher costs and t
                                                                                        is still
                                                                                           the UStightly  controlled.
                                                                                                      dollar.           Currency
                                                                            driving    volatility   are  the The    dollar
                                                                                                               upcoming     isUS likely to holduncertainty
                                                                                                                                     election,   strong since   there
                                                                                                                                                             over     a
                                                                                                                                                                    futu
       volatility continues to impact purchasing, resulted in higher costslimited
                                                                                and threatening
                                                                                       role  as   a    margins.
                                                                                                    reserve       Other and
                                                                                                              currency    factors the fact that
                                                                            negotiation, ongoing uncertainty with US/China                  tradethe Chinese
                                                                                                                                                   and         Renminb
                                                                                                                                                       the potential  re
       driving volatility are the upcoming US election, uncertainty over          futurecontinues
                                                                              volatility   stimulus to  packages,     the Brexit resulted in higher costs and
                                                                                                           impact purchasing,
       negotiation, ongoing uncertainty with US/China trade and the potential drivingresurgence
                                                                                        volatility   of
                                                                                                     areCovid-19    this Winter.
                                                                            EUR    / USD   (Oct 2019     –the
                                                                                                            Octupcoming
                                                                                                                 2020)          US election, uncertainty over fut
                                                                              negotiation, ongoing uncertainty with US/China trade and the potential r
       EUR / USD (Oct 2019 – Oct 2020)                                                 EUR/USD              Low             High
                                                                              EUR / USD (Oct 2019 – Oct 2020)
                                                                                      2 year                1.06            1.94
                                                                                      1 year                1.06            1.19
                                                                                      1 month               1.16            1.87
                                                                                                                                                                      T
                                                                                                                                                                      U
                                                                                     The Euro appreciated against the                                                 th
                                                                                     USD through Q3 on optimism over                                                  wT
                                                                                     the European economy but flattened                                               wU
                                                                                     with fears of a second COVID-19                                                  et
                                                                                     wave. The EUR/USD pair is                                                        1w
                                                                                     expected to trade in the range of                                                thw
                                                                                     1.17 until 2021. Assuming stability in                                           the
                                                                                     the US and Covid-19 containment,                                                   1
                                                                            EUR
                                                                              The/ Chinese
                                                                                     CNY   (Julycould
                                                                                     the Euro      2019reach
                                                                                                 Yuan     – July
                                                                                                          made     2020)
                                                                                                                 1.20  nextagainst
                                                                                                                   gains      year. the Euro                            t
       EUR / CNY (July 2019 – July 2020)                                      through Q3, weakening into Q4. Chinese government                                         t
                                                                                       EUR/CNY
                                                                                      CNY   (July   2019   – Low
                                                                                                              July  2020)    High
                                                                              officials have warned of risks of CNY fluctuation in
                                                                              EUR   /
                                                                                   both directions
                                                                                         2 year    through  2021. Most
                                                                                                         7.49        8.31predictions are
                                                                                   that the Chinese currency
                                                                                         1 year          7.55 will continue
                                                                                                                     8.31   to appreciate
                                                                                   against  both the Euro7.83
                                                                                         1 month          and the USD.
                                                                                                                     8.01
                                                                                                                                                                     T
                                                                                                                                                                     a
                                                                                        The Chinese Yuan made gains                                                  w
                                                                                        against the Euro through Q3,                                                 gT
                                                                                        weakening      into   Q4.     Chinese                                        ria
                                                                                        government officials have warned of                                          dw
                                                                                        risks of CNY fluctuation in both                                             pg
                                                                                        directions through 2021. Most                                                cur
                                                                                        predictions are that the Chinese                                             ad
                                                                                  USD / currency
                                                                                        CNY (Julywill
                                                                                                   2019continue  to appreciate
                                                                                                         – July 2020)                                                  p
                                                                                        against both the Euro and the USD.                                             c
       USD / CNY (July 2019 – July 2020)                                                                                                                               a
         The Chinese Yuan appreciated against the USD                              USD / CNY (July 2019 –Low
                                                                                          USD/CNY         July 2020) High
         through Q3 to 2018 levels, after plunging to
         2008 lows in Q1 early this year. Drivers for Yuan                                 2 year              6.64           7.17
         appreciation are a fast recovery in the domestic                                  1 year              6.64           7.16
         economy and ongoing strength in exports. Volatility                               1 month             6.64           6.82                                   T
         is expected to continue through Q4 and into 2020                               The Chinese Yuan appreciated
                                                                                                                                                                     a
         based on the US election outcome and COVID-19                                                                                                               le
                                                                                        against the USD through Q3 to 2018                                           QT
         containment.                                                                   levels, after plunging to 2008 lows in                                       aa
                                                                                        Q1 early this year. Drivers for Yuan                                         dl
                                                                                        appreciation are a fast recovery in the                                      stQ
                                                                                        domestic economy and ongoing                                                 ea
                                                                                        strength in exports. Volatility is                                           ind
                                                                                   Sources: XE.com, News/Analyst Reports
                                                                                        expected to continue through Q4 and                                          os
        Sources: XE.com, News/Analyst Reports                                           into 2020 based on the US election                                             e
                                                                                        outcome
                                                                                  © 1995-2020
                                                                                    Sources:      and COVID-19
                                                                                               Copyright
                                                                                             XE.com,              containment.
                                                                                                         by CBX Software.
                                                                                                       News/Analyst       All rights reserved.
                                                                                                                      Reports                                          i
       © 1995-2020 Copyright by CBX Software. All rights reserved.                   Sources: XE.com, News/Analyst Reports                                             o
                                                                                   © 1995-2020 Copyright by CBX Software. All rights reserved.
    © 1995-2020 Copyright by CBX Software. All rights reserved.
Global Commodity Rates & Trends                                                                                                          10
                                                                                                                                12

     Global Commodity Rates & Trends
          Q4 2020 News and Analysis:
     Q4 2020 News & Analysis: Almost all commodity prices recovered in the third quarter of 2020 following
        Almost all commodity prices recovered in the third quarter of 2020 following steep declines earlier in the
     steep declines earlier in the year due to the COVID-19 pandemic. Following a strong summer rebound, as
        year due to the COVID-19 pandemic. Following a strong summer rebound, as lockdowns lifted, momentum in
     lockdowns
        commodity lifted,prices
                           momentum       in commodity
                                 has stalled     in recentprices
                                                              weekshasasstalled
                                                                           second in recent
                                                                                     wavesweeks
                                                                                             of theas   second waves
                                                                                                      pandemic           of the
                                                                                                                  and economic       uncertainty
     pandemic and economic uncertainty continued. A levelling off in demand is coinciding with limited supply
        continued. A levelling off in demand is coinciding with limited supply suggesting that commodity prices face
     suggesting
        an uphillthat  commodity
                    battle.           prices
                             Oil prices,      facetend
                                           which    an uphill battle.
                                                        to lead   mostOil prices, which prices
                                                                          commodity      tend toin
                                                                                                 lead  mostdirection,
                                                                                                    either  commodity areprices
                                                                                                                           likely to have a slow
     in either direction,  are likely  to  have a  slow recovery    into  2021. The   forecast  for
        recovery into 2021. The forecast for commodities depends on geopolitical factors such as thecommodities    depends    on outcome of the
     geopolitical
        US election, the ongoing Brexit scenario and how long it takes for a COVID-19 vaccine to roll-out.it
                   factors   such  as   the  outcome   of the  US  election,  the   ongoing Brexit   scenario  and how   long
     takes for a COVID-19 vaccine to roll-out.

     Crude Oil
     Crude Oil                                                                                   Crude oil prices have doubled
                                                                                                 since their April low, supported
     70
     70                               Oil US$ per barrel                                        Crude oil prices have doubled since their
     65                                                                         Dated            by sharp supply cuts by OPEC.
     65                                                                         Dated           April low, supported by sharp supply cuts
     60
     60                                                                         Brent,light
                                                                                Brent,light      However, prices remain a third
     55
     55
                                                                                blend 38
                                                                                blend  38       by  OPEC. than
                                                                                                 lower      However,    prices remain a third
                                                                                                                    pre-pandemic
                                                                                API
     50                                                                         API
                                                                                                lower
     50
     45
     45
                                                                                                 levels.than pre-pandemic
                                                                                                         Oil prices            levels. Oil prices
                                                                                                                     are expected
     40
     40
                                                                                Dubai,mediu
                                                                                Dubai,mediu
                                                                                m, fob
                                                                                   fob
                                                                                                are  expected
                                                                                                 to increase    to increase
                                                                                                              gradually        gradually
                                                                                                                         in 2021  as      in
                                                                                m,
     35
     35                                                                         Dubai Fateh
                                                                                Dubai  Fateh     demand
                                                                                                2021        is matched
                                                                                                       as demand             by an
                                                                                                                     is matched    by an easing
     30
     30
     25
     25
                                                                                32 API
                                                                                32 API           easing
                                                                                                of  supply. of     supply.      The
     20
     20                                                                         West Texas
                                                                                West  Texas      pandemic could have lasting
     15
     15                                                                         Intermedia
                                                                                Intermedia       effects  on oil demand      though
     10
     10                                                                         40 API,
                                                                                    API,        The   pandemic    could have    lasting effects
                                                                                40               as changes in consumer
                                                                                Midland
                                                                                Midland         on oil demand though as changes in
                                                                                Texas
                                                                                Texas            behavior influence demand.
                                                                                                consumer behavior influence demand.

     Rubber
     Rubber                                                                                      Natural rubber prices have
                                                                                                soared through the pandemic
                  Rubber, No. 3 Smoked Sheet (RSS3), Singapore                                  Natural
                                                                                                partly onrubber
                                                                                                          strong prices
                                                                                                                   demand   have    soared
                                                                                                                              for PPE
                                    Exchange                                                    through
                                                                                                 such as the   pandemic
                                                                                                           protective         partlyOn
                                                                                                                          gloves.     on strong
     2.0
     2.0                  Price in US cents per kilogram                                        demand
                                                                                                the supplyfor PPE     suchpandemic
                                                                                                                  side,      as protective
                                                                                                related On
                                                                                                gloves.   labor    shortages
                                                                                                             the supply     side, and
                                                                                                                                    pandemic
     1.8
     1.8                                                                                         weatherlabor
                                                                                                          issues    in Thailand
     1.6
                                                                                                related         shortages      andandweather
     1.6                                                                                        Vietnamin (key    producers)       have (key
                                                                                                issues     Thailand     and Vietnam
     1.4
     1.4                                                                                        resulted in reductions in rubber
                                                                                                producers)    havefactors
                                                                                                 production. Key      resulted    in reductions in
                                                                                                                             in rubber
     1.2
     1.2                                                                                        rubber
                                                                                                price volatility into 2021 include in rubber
                                                                                                        production.     Key   factors
     1.0
     1.0                                                                                        price volatility into 2021
                                                                                                COVID-19     recovery,     US include
                                                                                                                                 China COVID-19
                                                                                                recovery,  US China
                                                                                                 trade tension   and the trade   tension and the
                                                                                                                            American
13                                                                                              American    election outcome.
                                                                                                election outcome.

     Metals
     Metal
                                                                                                      Despite the steepest global
                                Metals US$ per metric ton                                             economic
                                                                                                Despite            contraction
                                                                                                         the steepest            in recent
                                                                                                                       global economic
     20000
                                                                                                      history,
                                                                                                contraction     base metal
                                                                                                             in recent        prices
                                                                                                                       history,        have
                                                                                                                                base metal
     18000
     16000                                                                        3000          pricessurged     well well
                                                                                                       have surged     above
                                                                                                                           abovetheir
                                                                                                                                  their pre-
                                                                                                                                        pre-
     14000                                                                                            pandemic
                                                                                                pandemic   levels.levels.  Key drivers
                                                                                                                   Key drivers           are
                                                                                                                                are Chinese
     12000                                                                         2442               Chinese    stimulus  measures
                                                                                                stimulus measures and the pandemic      and
                                                                                  2000
     10000                                                                                            thewhich
                                                                                                recovery    pandemic     recovery
                                                                                                                 has fueled           which
                                                                                                                             an industrial
      8000                                                                        1873
      6000                                                                                      and manufacturing rebound. Going and
                                                                                                      has    fueled   an   industrial
                                                                                  1000                manufacturing     rebound.     Going
      4000                                                                                      forward,  waning stimulus    measures    and
      2000                                                                         124
                                                                                                      forward,       waning       stimulus
                                                                                                the potential of over-supply might impact
         0                                                                        0                   measures and the potential of
                                                                                                pricing. Metals are expected to see a
                                                                                                      over-supply might impact pricing.
                                                                                                modest gain in prices in the range of 2%
                                                                                                      Metals are expected to see a
                                                                                                for 2021.
                 Tin               Aluminum          Copper            Nickel
                                                                                                      modest gain in prices in the
                 Zinc              Lead              Iron                                             range of 2% for 2021.
                                                                                Q4 2020 Retail Sourcing Report
     Cotton
                                                         Q4 2020 Retail
     Latest reports indicate a decrease in global cotton production          Sourcing
                                                                      (-934,000 bales toReport
                                                                                         116.3 million) along
     with an increase in global mill-use (+1.5 million bales to 114.2 million) through Q3/Q4. This has led to
     2.7 million bale reduction for 2020/2021 forecasts, which still leaves stockpiles at the one of the highest
12000                                                                                20002000                     Chineselevels.
                                                                                                                          pandemic
                                                                                                                            Chinese       stimulus
                                                                                                                                         stimulus   Key   measures
                                                                                                                                                            drivers
                                                                                                                                                         measures     are   and
                                                                                                                                                                          and
     10000 12000
        10000
            14000
           10000
                                                                                                      2442
                                                                                                      2000
                                                                                                     2000
                                                                                                                        the   pandemic
                                                                                                                            the
                                                                                                                             the   pandemic
                                                                                                                                    pandemic    recovery
                                                                                                                                                       recovery
                                                                                                                                                        recovery   whichwhich
                                                                                                                                                                        which
           10000
            12000
      80008000                                                                                  18732442
                                                                                                     1873                 Chinese
                                                                                                                        has the
                                                                                                                            hasfueled stimulus
                                                                                                                                   pandemic
                                                                                                                                    fueled an    an  measures
                                                                                                                                                      recovery
                                                                                                                                                   industrial
                                                                                                                                                         industrial   and
                                                                                                                                                                       which
                                                                                                                                                                     and   and
            8000                                                                                      1873
                                                                                                   2000                      has     fueled an     an industrial
                                                                                                                                                          industrial        and
            10000
            8000
      60006000                                                                                       1873
                                                                                                10001000                  the
                                                                                                                            has pandemic
                                                                                                                                   fueled         recovery         whichand
            6000
             8000
            6000
      40004000                                                                                       1000
                                                                                                   1873                 manufacturing
                                                                                                                            manufacturing
                                                                                                                             manufacturing     rebound.
                                                                                                                                                      rebound.
                                                                                                                                                       rebound.   GoingGoing
                                                                                                                                                                        Going
            4000                                                                                         1000             has    fueled an industrial
                                                                                                                            manufacturing            rebound.         and
                                                                                                                                                                      Going
             6000
            4000
      20002000                                                                                    1241000
                                                                                                                        forward,
                                                                                                                             forward, waning
                                                                                                                            forward,           waning
                                                                                                                                                waning         stimulus
                                                                                                                                                                    stimulus
                                                                                                                                                                    stimulus
            2000                                                                                       124
                                                                                                         124              manufacturing
                                                                                                                            forward,             rebound. Going
                                                                                                                                               waning              stimulus
             4000
         0 2000
             0 0                                                                                0     0 124             measures
                                                                                                                            measures
                                                                                                                             measures  and  and
                                                                                                                                             andthe the  potential
                                                                                                                                                        the    potential
                                                                                                                                                               potential of of
                                                                                                                                                                             ofof
             Cotton
                                                                                                         0                forward,
                                                                                                                            measuresmight  waning
                                                                                                                                            and       theimpactstimulus
                                                                                                                                                              potential
11           2000
                0
                   0                                                                                 0
                                                                                                      0
                                                                                                     124
                                                                                                                        over-supply
                                                                                                                            over-supply
                                                                                                                             over-supply
                                                                                                                          measures
                                                                                                                            over-supply  and  might
                                                                                                                                               mightimpact
                                                                                                                                                  the
                                                                                                                                              might
                                                                                                                                                                pricing.
                                                                                                                                                           impact
                                                                                                                                                          potential
                                                                                                                                                         impact
                                                                                                                                                                     pricing.
                                                                                                                                                                      pricing.
                                                                                                                                                                         of
                                                                                                                                                                    pricing.
                                                                                                                        Metals
                                                                                                                            Metalsareare
                                                                                                                             Metals      expected
                                                                                                                                        are    expected
                                                                                                                                                expected     to pricing.
                                                                                                                                                                  see
                                                                                                                                                                  to see  a aa
                                                                                                                          over-supply
                                                                                                                            Metals
                                                                                                                        modest         are
                                                                                                                                    gain
                                                                                                                                          might      impact
                                                                                                                                             inexpected
                                                                                                                                                    prices       toto see
                                                                                                                                                                        see   a
                    Tin TinTin           Aluminum
                                             Aluminum         Copper
                                                                   Copper          Nickel
                                                                                       Nickel
                                                                                                                            modest
                                                                                                                          Metals
                                                                                                                             modest
                                                                                                                            modest
                                                                                                                                         gain
                                                                                                                                     aregain
                                                                                                                                           expected
                                                                                                                                          gain      in
                                                                                                                                                   inin pricesto in
                                                                                                                                                          prices
                                                                                                                                                           prices see the
                                                                                                                                                                      in
                                                                                                                                                                     in
                                                                                                                                                                            the
                                                                                                                                                                       inathethe
                                               Aluminum              Copper              Nickel
                            Tin
                    Zinc Zinc
                           Zinc
                                               Aluminum
                                         LeadLead
                                               Lead
                                                                     Copper
                                                              Iron Iron
                                                                     Iron
                                                                                        Nickel                          range
                                                                                                                          modestof
                                                                                                                            range
                                                                                                                             rangeof2%
                                                                                                                                     of  for
                                                                                                                                         2%
                                                                                                                                      gain
                                                                                                                                      of2%2%in 2021.
                                                                                                                                               for    2021.
                                                                                                                                                     prices
                                                                                                                                                       2021. in the
                                                                                                                                                for2021.
                            Tin
                            Zinc               Aluminum
                                               Lead                 Copper
                                                                     Iron              Nickel                               range              for
                            Zinc               Lead                Iron                                                   range of 2% for 2021.
     Cotton Latest reports indicate a decrease in global cotton production (-934,000 bales to 116.3 million) along with
         Cotton
           Cotton
            Cotton
             Cotton
            an    increase in global mill-use (+1.5 million bales to 114.2 million) through Q3/Q4. This has led to 2.7 million
     Latest   reports
         Latest
            bale
           Latest  reportsindicate
                      reduction
                      reports  indicate
                      reports indicate
                                       a for
                                          decrease
                                             a adecrease
                                               a2020/2021
                                                          in global
                                                   decrease             cotton
                                                               ininglobal
                                                                       forecasts,
                                                                     global       production
                                                                             cotton
                                                                               cotton  production
                                                                                          which
                                                                                        production  (-934,000
                                                                                                          (-934,000
                                                                                                       still          bales
                                                                                                                  leaves
                                                                                                             (-934,000
                                                                                                            (-934,000
                                                                                                                           balesto 116.3
                                                                                                                                     toto116.3
                                                                                                                              stockpiles
                                                                                                                            bales
                                                                                                                            bales           116.3million)
                                                                                                                                                      million)
                                                                                                                                                      at    the
                                                                                                                                                       million) alongalong
                                                                                                                                                                   onealong  of the highest on record.
            Latest
     withwith
           anLatest
           with    an  reports
                increase
                an   increase  in
                        increase
                                  indicate
                                  indicate
                                   global
                                    ininglobal
                                           global
                                                   decrease in
                                               a decrease
                                              mill-use
                                                    mill-use
                                                      mill-use  in
                                                            (+1.5
                                                                     global
                                                                    global
                                                                     million
                                                                 (+1.5
                                                                    (+1.5
                                                                              cotton
                                                                             cotton
                                                                                bales
                                                                          million
                                                                            million
                                                                                        production
                                                                                       production
                                                                                         to
                                                                                     bales
                                                                                       bales 114.2
                                                                                              to to114.2 (-934,000
                                                                                                         million)
                                                                                                     114.2       million) bales
                                                                                                                        through
                                                                                                                   million)        toto
                                                                                                                             through
                                                                                                                              through
                                                                                                                                           116.3
                                                                                                                                        116.3
                                                                                                                                       Q3/Q4Q3/Q4
                                                                                                                                              Q3/Q4.
                                                                                                                                                      million)
                                                                                                                                                   million)
                                                                                                                                                     This
                                                                                                                                                        . .  has
                                                                                                                                                           This
                                                                                                                                                            This
                                                                                                                                                                    along
                                                                                                                                                                 along
                                                                                                                                                                    led
                                                                                                                                                                   has
                                                                                                                                                                   has    to
                                                                                                                                                                          led  to
                                                                                                                                                                           ledtoto
     2.7 2.7
            Both
            with
             with
          million
                    an China
                    bale
              million
                        increase
                    an increase    and
                            reduction
                          bale
                                       in
                                 reduction
                                            India
                                           global
                                       in global
                                            for for
                                                       reported
                                                      mill-use
                                                      mill-use
                                                  2020/2021
                                                       2020/2021   (+1.5higher
                                                                    (+1.5   million
                                                                           million
                                                                    forecasts,
                                                                        forecasts,
                                                                                    than
                                                                                       bales
                                                                                      bales
                                                                                  which
                                                                                             predicted
                                                                                                to
                                                                                              tostill
                                                                                            still
                                                                                        which
                                                                                                     114.2
                                                                                                  114.2
                                                                                                   leaves
                                                                                                                     mill-use
                                                                                                                  million)
                                                                                                               million)
                                                                                                                 stockpiles
                                                                                                                             through
                                                                                                                           through  and
                                                                                                                                 at the  Q3/Q4 China
                                                                                                                                            Q3/Q4
                                                                                                                                             one
                                                                                                                                                        .
                                                                                                                                                     . This
                                                                                                                                                     of the
                                                                                                                                                             imported
                                                                                                                                                           Thishashasled
                                                                                                                                                                highest    to more than forecast.
                                                                                                                                                                         led
           2.7
            2.7  million
                 million     bale
                             bale  reduction
                                    reduction       for
                                                    for  2020/2021
                                                         2020/2021        forecasts,
                                                                          forecasts,     which
                                                                                         which      stillleaves
                                                                                                   still    leaves
                                                                                                           leaves     stockpiles
                                                                                                                       stockpiles
                                                                                                                      stockpiles       at
                                                                                                                                        at
                                                                                                                                       at   the   one
                                                                                                                                              theone
                                                                                                                                            the     one   of
                                                                                                                                                          of   the
                                                                                                                                                            ofthe    highest
                                                                                                                                                                thehighest
                                                                                                                                                                     highest
            Prices
         onon2.7
     on record.   million
             record.
            on      Both
                record.   have
                         Bothbale
                            China
                            Both    increase
                                    reduction
                                 Chinaandand
                                    China    India  for
                                              andIndia
                                              and      steadily
                                                        2020/2021
                                                      reported
                                                     India reported
                                                             reported since
                                                                         higher
                                                                           higherpandemic
                                                                         forecasts,
                                                                    higher    than      which
                                                                                     predicted
                                                                                  than
                                                                                    than  predicted
                                                                                           predicted induced
                                                                                                 still  leaves
                                                                                                     mill-use
                                                                                                            mill-use and
                                                                                                              mill-use  lows
                                                                                                                     stockpiles
                                                                                                                           China
                                                                                                                         and
                                                                                                                           and    inatimported
                                                                                                                                China
                                                                                                                                 China  early
                                                                                                                                         the    oneApril
                                                                                                                                           imported
                                                                                                                                             imported
                                                                                                                                                      of
                                                                                                                                                       morethe and
                                                                                                                                                             morehighest
                                                                                                                                                                 than
                                                                                                                                                              more      have held steady partly due to
                                                                                                                                                                      than
                                                                                                                                                                       than
             onrecord.
                 record.     Both
                             Both   China
                                    China     and    India
                                                     India   reported
                                                            reported      higher
                                                                          higher    than
                                                                                   than    predicted
                                                                                         predicted           mill-use
                                                                                                          mill-use     andand   China
                                                                                                                              China        imported
                                                                                                                                        imported        moremore     than
                                                                                                                                                                  than
            Hurricane
     forecast.
         forecast.Prices
           forecast.
            forecast.
             forecast.
                       Prices
                          PricesDelta
                             have
                           Prices
                           Prices
                                  have
                                     have
                                     have
                                     have
                                            which
                                     increase
                                          increase
                                             increase    impacted
                                                    steadily
                                                         steadilysince
                                                           steadily
                                             increase steadily
                                             increase      steadilysince    the
                                                                         pandemic
                                                                      since
                                                                        since      US
                                                                              pandemic
                                                                                pandemic
                                                                       sincepandemic     cotton
                                                                                        induced
                                                                                             induced
                                                                                pandemicinduced inducedbelt.
                                                                                                      lows
                                                                                               inducedlows    lowsin
                                                                                                                lowsWhile
                                                                                                                     early
                                                                                                                      in
                                                                                                                       in     indicators
                                                                                                                            April
                                                                                                                          early
                                                                                                                           early
                                                                                                               lowsininearly         and
                                                                                                                                  April
                                                                                                                                   April
                                                                                                                          earlyApril
                                                                                                                                  April       have
                                                                                                                                            and
                                                                                                                                             and
                                                                                                                                            and       are
                                                                                                                                                   haveheld
                                                                                                                                                     have
                                                                                                                                                   have       that
                                                                                                                                                               steady
                                                                                                                                                             held
                                                                                                                                                              held
                                                                                                                                                             held       cotton
                                                                                                                                                                    steady
                                                                                                                                                                     steady
                                                                                                                                                                    steady         prices should continue
     partly  due
         partly
           partly
            to     todue
                 due
                 rise
            partly   dueHurricane
                         to  Hurricane
                            to
                          into
                            to    2021, Delta
                                Hurricane
                                Hurricane    Deltawhich
                                                Delta
                                              volatility
                                                Delta      impacted
                                                       which
                                                         which
                                                         which  impacted  the
                                                                   impacted
                                                                could
                                                                   impactedcome US
                                                                               the
                                                                                the  cotton
                                                                                 theUS UScotton
                                                                                      from
                                                                                      US       belt.
                                                                                           cotton
                                                                                           cottonthe    While
                                                                                                     belt.
                                                                                                      belt.    While
                                                                                                         outcome
                                                                                                      belt.         indicators
                                                                                                                 While
                                                                                                                While   indicators
                                                                                                                          indicators
                                                                                                                             of     areand
                                                                                                                                  the
                                                                                                                         indicators        that
                                                                                                                                          are
                                                                                                                                           US
                                                                                                                                          are
                                                                                                                                                have
                                                                                                                                           arethatthat
                                                                                                                                                        held
                                                                                                                                                   cotton
                                                                                                                                                        cotton
                                                                                                                                                          cotton
                                                                                                                                                  election,
                                                                                                                                                 that   cotton
                                                                                                                                                                 steady
                                                                                                                                                                prices
                                                                                                                                                                    prices
                                                                                                                                                                     prices
                                                                                                                                                                     ongoing
                                                                                                                                                                    prices          US/China (and US/
             partly due to Hurricane Delta which impacted the US cotton belt. While indicators are that cotton prices
     should
         shouldcontinue
           should
            should  continue to rise
                       continue   toto  into
                                      rise
                                         rise  2021,
                                             into
                                                into2021,
                                                into     volatility
                                                       2021,          could
                                                              volatility
                                                                volatility     come
                                                                           could
                                                                             could  comefrom
                                                                                      come  from the the
                                                                                               from    outcome
                                                                                                        the   outcome
                                                                                                                outcomeof the
                                                                                                                            of   US
                                                                                                                              ofthe
                                                                                                                                  the   election,
                                                                                                                                       USUS    election,ongoing
                                                                                                                                                election,     ongoing
                                                                                                                                                               ongoing
             should continue
            Vietnam)           trade
                        continue     to
                                     to rise
                                           tension
                                         rise   into   2021,
                                                           and
                                                       2021,    volatility
                                                                    how
                                                               volatility    could
                                                                            long
                                                                            could    come
                                                                                     recovery
                                                                                    come      from
                                                                                            from       the
                                                                                                       from
                                                                                                     the       outcome
                                                                                                             outcome       ofofthe
                                                                                                                     COVID-19    theUSUStakes. election,
                                                                                                                                           election,          ongoing
                                                                                                                                                          ongoing
     US/China
         US/China (and
           US/China
            US/China       US/Vietnam)
                        (and
                           (and US/Vietnam)
                                   US/Vietnam)   trade   tension
                                                      trade
                                                        trade tension andand
                                                                 tension    how
                                                                             andhowlonglong
                                                                                  how     recovery
                                                                                         long  recovery
                                                                                                 recovery from      COVID-19
                                                                                                                 from
                                                                                                                   from COVID-19
                                                                                                                          COVID-19 takes. takes.
                                                                                                                                           takes.
            US/China (and
                     (and US/Vietnam) trade tension
                          US/Vietnam) trade  tensionand
                                                     andhow
                                                         howlong
                                                             longrecovery
                                                                  recoveryfrom
                                                                            fromCOVID-19
                                                                                 COVID-19  takes.
                                                                                         takes.

                                                                                                                                                                        Speed
                                                                                                                                                                        Scale
                                                                                                                                                                        Simplicity

               Source: Cotton Inc, News Reports
           Source:
           Source:
      Source:      Cotton
              Cotton
         Source:           Inc,
                     Inc,Inc,
                 Cotton   News  News Reports
                                 Reports
                              News Reports
                Sources: Cotton Inc, News Reports

             Plastics and Synthetic Fibers
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          ©
     © 1995-2020  Q4 2020 Snapshot:
          © 1995-2020
            1995-2020 Copyright
                       Copyright by
                 Copyright
        © 1995-2020        by CBX
                    Copyright
                                 by CBX
                              by CBX
                                    CBX Software.
                                         Software. All
                                    Software.
                                                     All rights
                                              All rights
                                       Software.
                                                         rights reserved.
                                                                 reserved.
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                                                                                                                                                                                                      14
                  Synthetic fiber prices, especially for nylon and polyester fell dramatically through Q3 on lower oil
     Plastics  and
           prices,   Synthetic
                   currency       Fibers
                            devaluations and lower demand for finished goods from Asia, Europe, and the US.
              Stability on the supply is also an issue going forward. Synthetic fiber prices in Asia fell by more than
     Q4 2020 News: Synthetic fiber prices, especially for nylon and polyester fell dramatically through Q3 on lower
              20% year-on-year, mostly due to price drops in polyester, the most widely used fiber.
     oil prices, currency devaluations and lower demand for finished goods from Asia, Europe, and the US.
     Stability on the supply is also an issue going forward. Synthetic fiber prices in Asia fell by more than 20%
     year-on-year, mostly due to price drops in polyester, the most widely used fiber.

                                            Plastics & Fibers, Regrind/ Flakes (Euros/kg)
                  1.0
                  0.9
                  0.8
                                                                                                                                      Nylon
                  0.7
                  0.6                                                                                                                 Polyester
                  0.5                                                                                                                 ABS
                  0.4                                                                                                                 PVC
                  0.3
                                                                                                                                      PP
                  0.2
                                                                                                                                      PS

                       Sources: IMF data, Plasticker, ICIS

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12
Quality Control Indicator
This report frequently covers quality control and quality assurance issues. Audit and inspection data which tend to mirror
sourcing activity, provide an indicator of activity and trends in various sourcing regions.

According to data from Quality Inspection provider QIMA, while sourcing and global trade picked up dramatically
through Q3 to meet demand, inspection and audit trends suggest that the recovery scramble has meant a sacrifice on
sustainability and social compliance. Many businesses went into survival mode, cutting costs where they can, adding
pressure on suppliers, in turn putting worker safety and product quality at risk.

Most of the issues around quality we have seen are related to inconsistencies with suppliers and the ability to adapt to
the added demands of the pandemic, both at the buyer and supplier level.

Demand for inspections in China grew at the rate of 11% (year-on-year) overall in Q3, especially from US and European
buyers in the electrical and electronics sectors. Lower demand for inspections (down 15% in Q3) in the Chinese textile
and apparel sector reflected the ongoing shift in apparel production to lower cost countries such as Bangladesh,
Vietnam, and others.

Overall, South-East Asia saw a pick-up in demand for inspections of 10% year-on-year, with growth in Myanmar,
Indonesia, the Philippines, and Vietnam – who all took business from China. South-Asia also saw growing demand for
inspections and audits, led by Bangladesh where inspections grew 86% in September.

Sources: QIMA Data, News Reports
The trend of nearshoring, which was picking up in recent years appears different for US and European buyers. The QIMA
data suggests that US brands were more likely to buy from factories reopening in South Asia than from Latin or South
America, whereas European brands continued to increase their sourcing (and inspections) from countries such as
Morocco, Egypt and Tunisia, which all saw double digit growth.

 Sources: QIMA Data, News Reports

                                                    Q4 2020 Retail Sourcing Report
13       Focus Topic: COVID-19, E-Commerce Accelerator

         One of the bright spots that emerged through the COVID-19 pandemic is online retail. Already a growing force
         prior to 2020, world-wide implementation of physical-distancing and stay-at-home orders has accelerated the
         progression of e-commerce. To put it in perspective, according to Statista (chart below) in 2015 e-commerce
         represented 7.4% of total global retail sales, by late 2020 e-commerce’s share of total retail will be above
         16.1%. By 2023, online retail should comprise 22% of total retail.

         This pandemic driven fundamental shift in consumer behavior will bring lasting effects as consumers shop
         more online and retailers improve service levels. The cliché of “adapt or die” applies to retail more than ever.
         Online shopping trends we see now provide a sense of where e-commerce is headed.

         Lining the Nest

         Nearly half of consumers shifted their spending across online verticals such as apparel and electronics, but
         categories such as health, fitness, groceries, and DIY did especially well as people spent more time at home.
         Online orders in most of these categories grew by two- or three-times times year-on-year, with some retailers
         seeing increases of more than 20 times. (e-Marketer).

         Retailers that capitalized on consumer trends such as food preparation, online fitness and home offices were
         rewarded. Those able to perfect online models such as home delivery (Amazon) thrived through the pandemic
         and will continue to do so after.

         Platform vs Retailer/Brand

         Another evolving trend that grew through the pandemic
         is the customer focus on product availability in a
         competitive marketplace. Amazon grew exponentially
         not because it is cheaper, but because they provide a
         platform for competing products, often direct from the
         source which are vetted (reviewed) by other consumers.
         Other marketplace such as Wayfair and eBay have also
         carved out niches, but traditional retailers such as Best
         Buy and Walmart are also betting heavily on their own
         marketplaces to drive growth.

         Re-evaluating Cost-Cutting

         The biggest takeaway from the shift in consumer retail behavior, accelerated by the pandemic, is that
         conventional forms of cost-cutting are less relevant. For example, historically retailers and brands placed a
         heavy focus on the input cost factors we cover in this report – labor costs, material costs, currency exchange,
         logistics efficiency and speed to market. Going forward, the biggest area where retailers and brands need
         to look at cost-cutting is not through the supply chain, but at the end of it - whether in store or online or a
         combination. As an example, companies such as Bed-Bath and Beyond have done well with their Buy-Online-
         Pick-up-in-Store (BOPIS) model which has allowed them to cut bricks and mortar locations.

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The Customer is Always Right                                                                                        14

No doubt the elements that go into getting products to market quickly and at a reasonable price are still important. But
the biggest long-term factor of success for retailers and brands is the ability to innovate and provide consumers with
the holy grail of what consumers want. This is an ever-moving target but includes the right products (on-trend), meeting
product quality and social standards, pricing/value that makes sense and Amazon level service (question-free returns).
Most importantly though, the pandemic has reinforced some marketing basics – retailers need to ensure customers can
buy WHAT they want, WHEN they want it and WHERE they can get it – which increasingly means online.

The Outlook for Global Trade in Q4 and Beyond

No doubt the pandemic threw us for a loop, but the big question is what things will look like in the next quarter and
next year. Recent reports from the International Monetary Fund (IMF) and the United Nations Conference on Trade and
Development (UNCTAD) suggest that we are on the road to recovery through Q4 and into 2021, but it could be a rocky
road.

Despite what looks like a pandemic recovery, UNCTAD data showed a 5% drop in world trade in Q3 compared to the
same quarter in 2019. This is certainly an improvement over Q2, which saw a 19% drop year-on-year, but overall global
trade is still expected to contract by around 7-9% relative to 2019. While not great news, these numbers reflect a
better than expected outcome, with manufacturing in Asia recovering quicker than expected and demand for products
continuing strong in North America and Europe, possibly as people spent more on goods versus services.

Asia is expected to fare better than the rest of the world, with the IMF forecasting a 2.2% contraction for 2020, based
mostly on the greater impact from COVID-19 through Q3 on India, Malaysia, and the Philippines. China is one exception,
with the IMF predicting growth of 1.9% for 2020 relative to 2019. Chinese exports plummeted in Q1 but picked up
strongly through Q2 and Q3 and should reach year-on-year growth of around 10% (UNCTAD). Chinese imports also grew
strongly through Q3, reaching 13% growth in September. The most dramatic decline in trade was in South and West Asia,
where imports dropped by 23% and exports declined by 29%.

Certain sectors such as energy and automotive were particularly hard hit, while other sectors such a communication
equipment, office machinery, textiles and apparel had robust growth. Exports in medical supplies from China, the
European Union, and the United States grew from an average of US $25 billion to $45 billion per month from January
to May 2020 and 50% per month in subsequent months. The concern revealed by the UNCTAD data is that wealthy
countries have more access to medical supplies, especially non-PPE products – for example, a vaccine. The report
stresses that once a COVID-19 vaccine is created, it is important for developing countries to have equal access to ensure
a faster global recovery.

                                                   Q4 2020 Retail Sourcing Report
16

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