Look Back And Glance Ahead

All in all, 2013 was a benchmark year for many spinners. It wasn’t the best year in recent memory,
nor the most profitable. But it was certainly among the most stable.

“What we have had for most of the past 12 months has been what the industry has needed for a
long time,” said one observer. “We didn’t have incredibly high peaks, where prices shot up
overnight and production became so backlogged that customers couldn’t get their product when they
needed it — if they could get it at all. At the same time, there wasn’t a dramatic drop-off either,
where suddenly orders stopped coming in, prices plummeted off the charts, and mills got stuck with
a lot of high-dollar product they couldn’t move.”

Soon after the 2012 holiday shopping season, business came pouring in for many, with
ring-spun yarns in particularly high demand. “It was hard to find a position in ring-spun for much
of the year,” said one yarn spinner. “But, unlike the boom of a few years ago, it wasn’t so tight
that you couldn’t find it anywhere. So prices remained pretty stable for most of the year. That, in
turn, gave customers confidence to place bigger orders.”

Overall, 2013 was, as one spinner put it, “a seller’s market.” He continued, “Obviously, we
don’t have the production in this country we had a few years ago, so it takes less of an uptick in
business to create a bit of a backlog.”

As is often the case, as the fourth quarter winds down, orders fall off a bit. “There is a
rush to get product out for the holiday season, and then we often see a short period of declining
business and retailers get rid of their inventory,” said another spinner.

Orders began slowing for many in mid-October and continued to be smaller and shorter through
November. Even so, many are optimistic business will return to the “new normal” after the typical
first-of-the-year inventory adjustment.

“Looking forward, we are optimistic about 2014,” said one spinner. “As we’ve said before, our
industry is pretty well aligned in regards to capacity and demand. Unless there is an unanticipated
blip, we see no reason why business won’t remain relatively strong at least through the first part
of 2014.”

TPP Still Up In The Air

What could derail the industry for 2014 and beyond, however, is the inclusion of Vietnam in
the Trans-Pacific Partnership (TPP) without a yarn-forward rule. Vietnam is the second-largest
exporter of apparel to the United States and relies heavily upon China – which is not a part of the
TPP – for yarns and fabric.

“Vietnam’s apparel exports are up 15,000 percent over the past ten years,” wrote North
Carolina Governor Pat McCrory in a September letter to U.S. Trade Representative Michael Froman.
“This enormous growth has been fueled by Vietnam’s large state-owned, state-subsidized apparel
sector that has relied on China for its textile inputs. Without strong textile rules in the TPP,
state-subsidized producers in Vietnam could easily overwhelm U.S. and other producers in the
Western Hemisphere.”

Said one U.S. yarn broker: “The TPP is the single-biggest obstacle we have today to expansion
of the textile industry in the United States. It is, literally, the only thing that is standing in
the way of a ‘New Deal’ for the U.S. industry. We have to figure out a way to either abolish the
TPP or, at an absolute minimum, make it yarn-forward.”

Added a spinner in Central America: “Not only would it destroy the U.S. textile base, it
would absolutely decimate Central America. It would leave hundreds of thousands of people without
jobs and cause economic disruption on an unbelievable scale.”

The TPP includes much more than textiles, however. The trade agreement came under increasing
fire in November when a secret draft was leaked that includes controversial intellectual property
(IP) reforms relating to pharmaceuticals, publishers, patents, copy-rights, trademarks, civil
liberties and liability of internet service providers.

“If instituted, the TPP’s IP regime would trample over individual rights and free expression,
as well as ride roughshod over the intellectual and creative commons,” WikiLeaks’ Editor-in-Chief
Julian Assange said in a press release. “If you read, write, publish, think, listen, dance, sing or
invent; if you farm or consume food; if you’re ill now or might one day be ill, the TPP has you in
its crosshairs.”

November/December 2013