Ring-Spun Strength Continues

eading into the final quarter of the year, business is strong for a number of US ring

“Ring-spun for us, right now, is by far the most dominant, particularly ring-spun combed
cotton in fine-counts,” said one Carolina spinner. “It appears, at this point, that it will likely
remain strong for the remainder of the year.”

For many spinners, the strength of the market so far has been driven, in large part, by the
return of some programs back to Central America.

“In the first two quarters of the year, we’ve benefited from more orders from Central
America, which is still the driving force for the US market,” said a ring spinner. “Even when I
sell domestically, a great percentage goes to fabric that ends up going to Central America to be
cut and sewn. The programs that have been coming back are relatively small, but they are still
significant. These same programs were in Asia for all of 2007. Most of our business in 2007 was
very small – one container, maybe two containers. Now we’re getting six containers, even 10
containers, at a time. Last year, I don’t think anyone was doing business on that scale, other than
the verticals.”

Stronger Dollar Causes Concern

The major short-term threat to the continuing improvement in business is the strengthening
dollar, said one spinner.

Added another: “The dollar is up yet again, which may make people start looking at the cost
again. The upside for us, however, is that an overall weak retail market is causing people to look
shorter-term – and then quick turnaround becomes increasingly important. Shorter-term benefits us,
even if we are more expensive. For the last six months or so, I’ve been pressed a lot more for
delivery than I have been for price, particularly on combed ring-spun items. Not that price isn’t
important, but delivery has moved to the forefront. They still want a fair price, of course. But
I’ve been able to move prices up and still sell because I’ve given customers good delivery.”

He continued: “And even though the price of oil has been coming down, the continued high
cost of moving freight inland should help us remain competitive in the region, especially if we can
control our supply chains between the United States and Central America. There are still some
bargains in moving freight and moving containers, but you have to look harder for them. If we work
hard at creating efficiencies in transportation, we can compete very well – from a freight
standpoint – with people bringing in goods from China. I think that’s a major part of our future in
this hemisphere, to be able to work on and generate efficiencies in our supply chain. I think, as
an industry, we’ve been doing a much better job of that lately.”

Uncertainty In China

The industry overall continues to keep a watchful eye on Asia, and particularly China.
“There is some uncertainty in the market right now about how China is going to react to solve some
of its problems, such as pollution and some social issues. That uncertainty creates the potential
for more business for us. We don’t have to pick up a large percentage of the overall volume for it
to be very significant. They don’t have to bring 20 percent of it back. We would never be able to
make 20 percent of what the United States consumes. If we can pick up just 2 or 3 percent, it would
be enough to allow US spinners to oversell capacity and hold on to our pricing. The rest of the
world can then fight over the remaining majority.”

OE Picking Up

Open-end (OE) business is also picking up for a number of spinners. “Our OE business is
improving, and I understand from my conversations with some major OE spinners, that their business
is good,” said one OE spinner.

“The market for ring-spun is tight, and prices are going up some. Typically, when the delta
between ring-spun and OE gets bigger, more folks are willing to go back to open-end. They might not
particularly like the hand, and it may not be particularly what they wanted, but it becomes
desirable because the cost is in line with the price points they want.”

September/October 2008