Looking ahead to the last quarter and half of the year, yarn spinners in the Western Hemisphere —
for the first time in nearly 20 months — are uncertain about what the future will bring.
“Things certainly are a lot different than they were just a few short weeks ago,” one yarn
spinner said in late July. “About six weeks ago, we started noticing a drop-off in business in
Central America. Then, maybe a week or two after that, we saw the same slowdown in our domestic
U.S. operations. To be honest, there are multiple reasons why this may have happened, and we aren’t
really sure which factor to attribute the slowdown to. Our best guess is inventory.”
Another spinner said that many customers bought more yarn than they needed in the first half
of the year because of concerns over supply.
“Certainly, positions were difficult to get with spinners early in the year, particularly
with ring-spun yarns,” he said. “Our feeling is that a number of customers overbought to make sure
they would have product available when they needed it. So right now, you have a market that is
experiencing a cycle of inventory reduction. We are optimistic that when some semblance of balance
occurs and inventories shrink to their normal levels, we will see a ramping up of business again.
“I guess that would put us in the position of being cautiously optimistic,” he continued.
“Certainly, we are still a long way from the dark days we experienced in the first quarter of
Other spinners interviewed by Yarn Market cited surplus inventory as a contributing factor to
diminished business. But they also were concerned that the recent and drastic fall in cotton prices
has contributed to the situation.
“I think you have a situation right now where a lot of mills are sitting on cotton that they
might have purchased for anywhere from $1.60 to $1.70 per pound, and the going rate is now closer
to $1.00 per pound,” said one spinner. “Mills are, obviously, going to be hesitant to take
such a big hit on price. And customers are reluctant to pay so much above the current market value.
This has put such a tremendous amount of pressure on prices. They are currently all over the
As of July 28, the price for the base quality of cotton in the seven designated markets
measured by the U.S. Department of Agriculture had fallen to $1.0568, down some $0.75 from the
all-time high reported in late 2010. As recently as mid-February, the average price for the base
quality of cotton was more than $1.80.
Competition From Asia
Other spinners point to a resurgence in aggressive competition from Asia as a potential
contributing factor to decreasing orders. “For a while, there was almost parity in prices among
products from the Far East and those from the United States and Central America,” said one
multinational yarn broker. “It seemed, at the time, that everyone around the world was having the
same issues with both price and availability of raw materials. There was a time late last year when
the 2010 cotton crop was gone, prices were high, and folks everywhere were concerned about just
getting the materials they needed to fill their orders. Then, beginning late in the second quarter
of this year, we began to see Asian yarns at drastically reduced prices. Either they were already
benefiting from lower raw material costs, or they were doing a better job of forecasting a price
the market would support.
“The net result is that business has slowed substantially, and multiple factors are in play
that would explain why. Yet, spinners remain optimistic that orders will regain their footing in
the near future.
“We’ve reached a position, especially in the United States, where our production capacity
roughly aligns with demand,” said a Southeastern spinner. “No doubt, we will have both downward and
upward spikes in business from time to time, but I don’t think we are ready yet to throw in the
towel on the remainder of the year. We are optimistic that when inventories are reduced in the very
near future, we will get an influx of new, sustained orders.”