Energy, gas and Italian textiles

Electricity and gas cost for Italian (and European) textile companies are increasing to reach in some cases up to +800% compared to a year ago, and in the “luckiest” cases mostly doubled or tripled numbers. What impact is this energy shock – linked to Russia’s war in Ukraine and the difficult international geopolitical situation – having, in the immediate term, on Italian textile production?
The problem is serious, with energy price increases much higher than we expected. Margins are suffering and have already shrunk significantly. Fortunately, in our case we are managing to compensate for the problem by increasing production volumes: for more than a year, due to the crisis in global supply chains and the partial reshoring of textile production in Europe, we have been facing an increase in demand and a peak in orders. Now, however, with this energy crisis, the situation becomes more complicated, and forces us to move in a framework, not easy to manage, in which – compared to the past – we produce more but with lower margins. Bearing in mind, moreover, that increasing prices for our customers is only possible within certain limits, otherwise even the brands most ‘loyal’ to Lanificio Cangioli would be forced to go elsewhere.
We are a healthy company, and we will come out of this historical juncture well, but it is clear that, right now, the economic and geopolitical circumstances do not help Italian textile entrepreneurs in their work.

To what extent is this energy shock likely to result, in the short and medium term, in a halting of the reshoring process from Asia – which had received a major boost from the pandemic and the global supply chain crisis – and a further shift of Italian textile production to Turkey and other non- European production centers?
Due to the energy crisis in Italy, we are burning a golden opportunity, for which we have been waiting for many years. The return of textile production to Europe is a phenomenon that had accelerated dramatically in the last 2 years, due to the pandemic and the countless problems with logistics and long-distance transport.
China is becoming increasingly isolated and is losing its lower-end textile production to countries such as Bangladesh, Thailand, Vietnam and Pakistan, while critical issues and uncertainties relating to intercontinental transport persist, so I personally do not believe that brands that have chosen European textile suppliers will return to sourcing mainly in Asia. From this point of view, I am convinced that the reshoring of textiles in Europe represents the beginning of a new historical phase from which there will be no easy return.
The problem is that in the European and Mediterranean area the situation of expensive energy is far from homogeneous: while in Italy energy and gas bills have more than doubled, in Turkey there has only been a slight increase, and in Spain and Portugal it has been possible to set a price cap for gas, with the consent of the European Union (EU) and thanks to the reduced energy interconnections between the Iberian peninsula and the EU area.

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Personally, at the moment, I see the situation of the textile industry in Portugal (a country with a great tradition in the sector and with strong skills) and Turkey (a country that is growing at an impressive rate in textiles and that can also count on the very strong devaluation of the Turkish lira, with obvious advantages in exports and with few drawbacks in imports, as the Turkish textile industry is an integrated chain that covers all production phases). But it is clear that Portugal and Turkey currently – compared to us – have the enormous advantage of lower energy costs, an objective competitiveness gap that the Italian entrepreneur – even if he is the best in the world – cannot immediately fill without the help of political institutions. What we have to do is hold on to a problem – that of high energy costs – that will end at some point.  

Italy, operating within a European framework, is moving to achieve greater energy self-sufficiency within a few years. In the immediate term, however, textile companies need concrete and rapid support. As a textile entrepreneur and manager, what do you ask of Italian and European institutions? What policy interventions do you hope for?
I fear that this situation will not be resolved within a few weeks. In my opinion, Italian textile companies will have to reckon with the problem of high energy prices – which I hope will be mitigated by political interventions but will be difficult to resolve completely in the immediate future – for the whole of 2023 and for a good part of 2024. It is clear, however, that Italian and European institutions can and must do their part to help companies through this difficult time.

First of all, I expect that the EU cannot tolerate for long the heterogeneity in energy prices between the different countries that I mentioned in my previous answer regarding the Iberian Peninsula. We need to mitigate prices and we need to do it uniformly, within the framework of a relaunch of European manufacturing and a serious medium-term plan of reindustrialization, a plan that cannot be exhausted in bonuses and extemporaneous local financing (which moreover prevent entrepreneurs from any strategic planning) and that must be pushed in the EU by the great manufacturing countries such as Germany and Italy, without suffering the energy blackmail of mercantile countries such as Holland.
Secondly, this European reindustrialization plan – which is necessary because Europe cannot live on tourism, services and trade alone – can and must take place in the context of investments that improve sustainability and energy savings in the textile industry. Just as the oil crisis of the 1970s favored research into the production of less polluting and more fuel-efficient cars, so today what we can hope for is that the energy crisis can give an acceleration to the green turn in textile manufacturing, encouraging the use of renewable energy. We have been making significant investments on this front for years, but always having to reckon – as is often the case in Italy – with an intricate and all-pervasive bureaucracy, a bureaucracy that represents one of the most serious problems in our country and that absolutely must be streamlined.

What is your company doing – at this difficult time – to cope with the energy crisis?
Sustainability, energy efficiency and low consumption are the watchwords for us today, and we have been working on this front for 15 years (since 2007), with a strong acceleration in the last 5 years. The results have arrived, and today we can certainly say that we have a cutting-edge energy profile, which is also helping us to keep costs down in the face of high energy prices.
We are also trying to do some lateral thinking, analyzing the possibility of finding alternative and innovative production cycles on product niches, and in particular on the dyeing and finishing side.