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Yarn Market
By Alfred Dockery, Technical Editor

Fiber Price Squeeze

Alfred Dockery, Technical Editor

T he big issue on spinners’ minds is raw material prices. Having just passed big man-made fiber price increases along to customers, yarn mills now are seeing a bump up in cotton prices. Fuel surcharges also are having an impact.

“Raw material prices are putting a real squeeze on margins,” said an open-end (OE) spinner. “ Cotton is going up. Polyester has already gone up and doesn’t seem to be coming back down.”

“Most of my customers have not really fought [the polyester price increase],” said a texturizer. “They understand where it is coming from.”

He also noted polyester and nylon yarn supplies are tight, with only two major US polyester producers and two major US nylon 6,6 producers remaining.

The recent hurricanes and increased demand from China are the primary reasons for cotton prices edging up; however, at least one spinner felt speculation was also a factor.

“I think cotton prices are abnormally high due to commodity index funds and hedge funds. You can’t look strictly at the fundamentals any longer,” he said.

According to the US Department of Agriculture’s (USDA’s) September 2005 cotton crop forecast, production is projected at 22.3 million bales, up 1 million from August but below 2004’s record of 23.3 million. Despite Hurricane Katrina’s impact, the effect on the US cotton crop seems limited, according to the USDA farm sector overview. The US export estimate for 2005-06 has been raised by 300,000 bales to 15.3 million — a record due to increased Chinese import demand and global trade, and a larger crop.

Roaring Or Slackening?
Reports about current running conditions vary. A specialty multisystem spinner has all plants running at full capacity. A texturizer is busy across the board. An OE spinner is operating at about 90-percent capacity. Another multisystem spinner noted business has definitely slacked off.

“Our outlook is week-to-week,” said one mill executive. “October and November look good. Our customers don’t give any indications anymore — no forecasts, nothing.”

One spinner was clearly worried about gas prices and their effect on consumers’ pocketbooks.

“It just goes back to retail sales being slow and consumers paying more for gas,” he said. “ They don’t have the disposable income they used to.”

The general consensus is that OE and ring-spun (RS) businesses have slowed. Combed RS, fine-count yarns are in good demand, and the 100-percent polyester air-jet business looks good. On the other hand, demand for 50/50 cotton/ polyester air-jet yarns for the fleece market is definitely off. Antimicrobial yarns are starting to move.

“Usually, we hear a lot about antimicrobial, but then nothing happens,” said a texturizer. “ This time, we are hearing a buzz about antimicrobial, and we are actually moving some product.”

Counting On DR-CAFTA
The export picture also is mixed; reports range from “extremely good” to “very slow.” The passage of the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) has spinners upbeat about long-term export prospects.

“Retailers seem to have more interest now in regional production, where before Asia was the keyword,” said one spinner. “We are having a lot of conversations with retailers about producing garments in the region.”

A texturizer reported 35 percent of his business is exports to the North American Free Trade Agreement region, and he expects additional export growth next year.

Consolidations
Several spinners opined one of the reasons for their strong running conditions is so much capacity has been taken out of the yarn market in recent years as mills have been idled. Two spinners felt the consolidation would continue within the US yarn market.

"There is still room for a few spinners to go out, and two or three are on real shaky ground," said a multisystem spinner.

"With uncertainty in the market, you have to wonder about companies without strong balance sheets," said an OE spinner.

Recent plant closings include Parkdale Mills Plant 8, Belmont, N.C.; and nylon and polyester yarn maker Premiere Fibers, Asheboro, N.C. - owned by Universal Fiber Systems LLC.

November/December 2005

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