Mills Running Full, Prices Still Tight

pinners are busy on all fronts including ring, open-end, air-jet and Vortex systems. Ring
spinning in particular is very strong. One spinner called it “the market trend that hasn’t gone
away.” Both carded and combed ring-spun yarns are in demand. Fine counts appear to be the hot spot,
especially combed Ne 40s moving toward Ne 50s for new, very lightweight apparel fabrics. Open-end
appears to be the weakest segment, although it isn’t doing too badly.

The Murata Vortex system is coming into its own, targeted to the ring-spinning market,
especially in fine counts such as Ne 40/1 and finer. The system’s ability to produce spandex core
yarns with strong cost advantages also is a factor.

Running conditions are the good news. The bad news is that there is still a lot of pressure
on margins, even with the mills running full — although at least one spinner reported holding onto
decent pricing in the carded segment as cotton prices decrease.

One industry observer suggested business has picked up for domestic spinners because world
cotton prices recently spiked higher than US prices, compelling some customers that had been
sourcing overseas to scramble for domestic production.

2003-04 Cotton Production

In its February report, the US Department of Agriculture (USDA) gauged US 2003-04 cotton
production at 18.2 million bales. Both mill use and exports were unchanged at 6.2 million bales and
13.2 million bales, respectively. The USDA also projects China’s total cotton imports from all
sources at 7 million bales. The projected US total offtake now stands at 19.4 million bales,
generating ending stocks of 4.25 million bales.

The estimated ending stocks-to-use ratio is 21.9 percent. World production for 2003-04 was
estimated at 92.7 million bales, up 450,000 bales from the USDA’s January report. World mill use is
estimated at 97.2 million bales. Consequently, worldwide ending stocks are projected at 32.5
million bales, a stocks-to-use ratio of 33.4 percent.

Cotton prices in 2003 were up by 37 percent relative to the five-year average. The USDA
expects the stronger prices will lead to increased cotton acreage.

Man-mades prices are rising, and domestic demand is strong. Rising oil prices are the culprit
here. One fiber executive noted polyester volume is stronger than forecast, up from a year ago and
up from the fourth quarter 2003. Some of this, he feels, is economic replacement because of the
relatively high price of cotton, and some is because of a strong market for man-made yarns.

Charles McMillion, MBG Information Services, has called attention to a recent Federal Reserve
report that shows seasonally adjusted production of textiles rose 1.2 percent, but remained 3.0
percent below year-earlier output levels. Textile capacity utilization rose from 71.8 percent in
December to 72.9 percent in January, reflecting increased output and reduced capacity.

Apparel production declined by 1.0 percent in January to levels 11.7 percent below one year
ago. Apparel capacity utilization fell slightly to 64.2 percent. These figures may change
significantly because of seasonal adjustment.

CBI Still A Positive

One spinner reported Caribbean Basin Initiative (CBI) business has slowed after a brisk fourth
quarter, and he expects a pickup in CBI orders in the second quarter. Another source reported
steady CBI bookings throughout the same time frame.

One example of how the yarn-forward rule is working for the domestic industry is a
100-percent performance polyester T-shirt made in the CBI region from US yarn that offers a
dollar-per-garment cost advantage over the same shirt sourced from Asia.

Because almost everyone seems to agree that the Central American Free Trade Agreement has
little to no chance of getting through Congress as is, and at least one mill owner is out stumping
for a refined version of the agreement, maybe it’s time to see if some of CBI’s best features could
be some of those refinements.

Editor’s Note: Alfred Dockery, editor of The HunTex Report — a newsletter for industrial
textiles — has been covering the textile industry for more than a decade. He is a graduate of North
Carolina State University’s College of Textiles and resides in Clemmons, N.C.

March 2004