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Yarn Market

Is The U.S. Industry Ready For New Capacity?

Jim Phillips, Yarn Market Editor

It wasn’t that long ago that textile plants swarmed over the Southeastern landscape. Every mile or two, brick smokestacks rose to touch the sky. The clack of fly-shuttle looms or the whine of spinning frames greeted five generations of American workers as they arrived morning, noon and night to begin shifts in plants that never closed.

Today, many of those plants still stand — some even dedicated to the industry for which they were built. But many more are vacant, or have been converted for other uses.

Will these plants be the last visages of an industry that is slowly dying? Or will they be a reminder of a bygone day for a revitalized industry that leads the world in productivity and investment? Is the U.S. textile industry ripe for new investment, or will the continued glut of imported yarn and fabric slowly squeeze all but the very few mightiest out of existence?

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“We have lost a lot of business over the past 30 years to Asia and developing nations,” said one spinner. “If only 20 percent of that came back, it would be more than we could handle at the moment. We have been in the position the past few years where demand and capacity for U.S. yarn is pretty much at an equilibrium point. We saw just a couple of years ago how a spike in demand can create a run on cotton, drive prices through the roof and, ultimately, create a dangerous game of cat and mouse for spinners, fabricators and end customers. Some mills saw earnings go way up, only to have them crash along with the market when demand and prices plummeted. More capacity is needed in this country now, but textile manufacturing is still seen as a very high-risk proposition in this country.”

But, then again, it wasn’t that long ago that people were saying the same thing about the steel industry. Today, new opportunities for oil and gas exploration in the United States have created a resurgence in the demand for domestic steel.  And in the auto industry, Toyota, Nissan, Honda, Hyundai, Kia and more manufacturers have assembly plants in the U.S.

“I think we are ripe for new investment,” said one observer close to the industry. “But, in the end, how stable our industry will be long-term depends upon our government’s willingness not to give away the store. The Trans-Pacific Partnership is a great example of this. If Vietnam is able to join without a yarn-forward rule, then it will open the floodgates for Chinese yarn and will be devastating to the U.S. industry. If we keep our heads about us and insist on yarn-forward in this and other agreements, then, I think, the industry has potential for a new era of growth.”

New plants have opened or changed ownership in the past few years. Honduras-based Grupo Karim’s resurrected a former R.L. Stowe Mills Inc. plant in Belmont, N.C., a few years ago, only to close it last year as a result of foreign competition. Recently, China-based yarn spinner Keer Group announced it would invest $218 million to build a new industrial yarn plant in Indian Land, S.C., and expects to create more than 500 jobs. Kernersville, N.C.-based Highland Industries recently announced a $4.1 million expansion of its industrial fabric facility in Cheraw, S.C.

“The question is whether or not you can generate an adequate return on investment,” said one yarn manufacturer. “Ring spinning, for example, requires a large amount of expenditure. And even though demand for ring-spun yarns has been high the past few years, you would have to have a very positive outlook for future sales to justify expansion. Open-end, on the other hand, could have numerous opportunities for expansion. What I think you are more likely to see, rather than a large jump in investment to create additional capacity, is investment to make existing capacity even more efficient and productive.”

Sales Slower Than Expected
December and early January orders for many spinners were down from expectations. “In our orders for the past few weeks, spot business has been a lot more predominant than program orders, but we expect the program orders to follow along shortly,” said one spinner. “Over the end of the year, there was an awful lot of inventory adjustment going on. And January is often slow, as customers begin to look at their priorities over the next few months. We still have no reason to be anything but optimistic about how business will play out over the next few months.”

January 2014


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