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September/October 2014 Sept/Oct 2014

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Yarn Market

Business Stays Strong

Jim Phillips, Yarn Market Editor

Spinners are reporting a steady stream of orders at mid-year, but many also report orders are smaller than usual and the pipeline is shorter than they would prefer.

“Business is stronger at this point than expected,” said one spinner. “But most of what we have are relatively small-volume orders. We keep hearing that a lot of program business is coming back to the hemisphere, but we haven’t seen it to any big degree.”

Added one industry insider: “Inventories are lower than they have been, as everyone seems to want everything on a just-in-time basis. A lot of customers have been left holding the bag in the past, and I think they are being very careful until there is a clear indication that we will see sustained economic growth. I think the recent downward revision of the projected growth in the U.S. economy raised more than a few eyebrows.”

The World Bank recently predicted the U.S. economy would grow by 2.1 percent in 2014, down from initial predictions of 2.8 percent. The bank attributes the shortfall to a sluggish first quarter as a result of unusually bad weather.

For the most part, spinners are pleased with where they are at this point in the year. “We are pleased with the stability of our operating schedules and with the volume of business opportunities that are presented to us,” said one spinner. “Compared to the volatility of the past, these are pretty good times for us.”

Market Turns Bearish
As of the first week of July, spot-market cotton prices for the base quality of cotton in the seven designated markets measured by the U.S. Department of Agriculture (USDA) averaged 74.24 cents per pound, down 348 points from the previous week. At the same time a year ago, the price was 82.11 cents per pound. Spot transactions reported  for the week ended July 3 totaled 1,430 bales, compared to 2,868 bales a year ago. Spot transactions for the season totaled 1,303,674 bales compared to 1,667,591 bales the corresponding week a year ago. The Intercontintal Exchange (ICE) October settlement prices ended the week at 71.79 cents, compared to 74.12 cents the previous week.

As prices continue to fall, experts see no immediate end in sight. “As we have pointed out, the amazing turnaround of the U.S. crop over the last six weeks has changed the market’s psychology from cautiously to decidedly bearish,” e-trade and sourcing company fibre2fashon stated in a release. “There is now little doubt among traders that ROW (rest of world) (cotton) inventories are going to increase substantially in the coming season, from the current 38.7 million bales to potentially 44-45 million bales by the end of the 2014-15-season. The USDA has its current estimate at 41.95 million bales. The market has remained under pressure, as the bearish case grows stronger by the week, which in turn emboldens sellers and keeps buyers in hiding.”

One spinner pointed out that U.S. spinners are better positioned to deal with a significant fall in cotton prices as opposed to a dramatic increase.  “There would be pricing pressure from our customers, but that is always the case regardless of the price of raw material.  What we cannot successfully deal with is a rapid rise in prices that gets the entire supply chain out of balance.”

TPP Concerns
In June, U.S. textile manufacturers emphasized to U.S. congressional leaders the importance of adopting fair and reasonable textile rules in the Trans-Pacific Partnership (TPP). A primary issue is whether or not Vietnam will be able to join the alliance without a yarn-forward rule. TPP was expected to be finalized some time ago, but on-going negotiations have stalled progress.

“A final TPP must contain provisions that have been the foundation of U.S. trade agreements over the past 25 years: fair rules of origin, common sense market access rules, and strong customs enforcement provisions,” said Jay Self, chairman of the National Council of Textile Organizations, and president and CEO of Greenwood Mills. “The NAFTA and CAFTA-DR free trade agreements have created a sustainable and competitive manufacturing platform for U.S. textile and apparel companies which allows us to compete in the global market. It is imperative that U.S. trade policy continues to foster the economic growth seen under these agreements by building on the successful rules they contain.”

July/August 2014


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