Spinners Anticipate A Solid First Half
Jim Phillips, Yarn Market Editor
Spinners reported a slight dip in orders at the beginning of the year, but, generally, they remain
optimistic that business will stay strong through the first months of 2013.
"We experienced a little bit of a falloff," said one spinner, "but that's not unusual for the time of year. It is not uncommon for customers at the start of a new year to pause to take stock of where they are and assess what their needs are going to be. I think all of the signs point to a strong first quarter, particularly for ring-spun (RS) yarns. Overall, we feel pretty good about where we are."
Another spinner added: "A lot of us in the States operated on a full schedule through the holidays. But a number of mills in Central America shut down for two weeks over the holidays. That has made for a buildup of inventory in the pipeline and, as a result, new orders have been slower coming in. The last few weeks have not been as robust as the last couple of months, but we expect it to pick up by the end of January. We see no reason why the first part of 2013 will not be as solid as the last half of 2012."
Increased Demand For All Yarn Types
Spinners expect RS yarns to continue to be in high demand for the foreseeable future. "Some customers have switched programs over from open-end (OE) to RS, and we continue to see some programs return from Asia," said one yarn broker. "We have reached the point over the past few years where RS demand and capacity are relatively aligned. With that being the case, any spike in demand is going to result in longer lead times and shorter supplies. RS yarns were hard to come by in the last quarter of 2012, and we expect that to continue to be the case going forward, at least for the short-term."
Buyers report, as well, increased activity in OE yarns. "Prices are still all over the place," said one industry observer," but demand for OE is somewhat stronger than it has been. The past several years have been relatively slow for OE. With increased global demand, we hope to see continued improvement."
Some specialty yarn spinners report robust business, as well. "We've been selling everything we can make," said one specialty spinner. "We expect business to continue to be strong through the first part of the year."
Pricing Pressures Remain; Cotton Prices Stable
Pricing remains an issue for many spinners, as customers continue to negotiate for lower rates. "For a long time, we needed to raise prices to cover our increased costs," said one spinner. "Prices went up quickly and more than we expected. But we only increased prices moderately, and certainly not by the amount that our costs went up. Now that raw material prices seem to have stabilized, prices have not come down as fast as our customers desire. We still have customers haggling over a couple of pennies per pound."
Added another spinner: "Our business has been operating on slim margins for a long time. Now that the cost of cotton has returned to pre-2009 prices, we are able to make a little more money. This means that we will be able to make some investments in our business that we have been planning for a while. Long-term, this will help create some efficiencies that will be good for both our company and our customers."
For the week ended January 11, quotations for the base quality of cotton - color 41, leaf 4, staple 34, mike 3.5-3.6 and 4.3-4.9, strength 27.0-28.9, uniformity 81.0-81.9 - in the seven designated markets measured by the U.S. Department of Agriculture averaged 70.87 cents per pound. The weekly average was down from 70.94 cents per pound the previous week, and from 90.03 cents per pound reported during the corresponding week of 2012.
"The cotton market has been relatively stable now for about six months, with only minor week-to-week fluctuations," said one yarn buyer. "Overall, I think this is good news for U.S. spinners. Over the past several years, it seems business has always been either feast or famine. A sustained period of stable business is an ideal situation. We can only hope that it continues."
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