Demand For Ring-Spun Yarns

fter running strong for most of the year, ring spinning (RS) appears to be slowing.
Open-end (OE) spinners are holding their own. Air-jet and vortex continue to suffer because they
are coupled with the sheeting and home furnishings businesses, which remain flat on their backs.

“Our business has slowed down recently,” said a ring spinner. “There has been a slowdown in
the denim market, which has affected all yarn. Our outlook is not as bullish as it was six months
ago — that’s for sure.”

He noted his plant is still running seven days a week and is beginning to build inventory. He
expects a normal Christmas shutdown and says circular knitting and hosiery haven’t softened as much
as denim.

A multisystem spinner sees a business slowdown in the fourth quarter.

“Going into next year, it’s a mixed bag,” he said. “The RS business is going to slow down. OE
won’t have the same structural problems as ring and air-jet. Air-jet is oversupplied and tied too
much to the furnishings sector.”

For once, an OE spinner is the ray of sunlight for the yarn market. He reports a definite
pickup in business across all segments.

“We’ve seen good improvement in the past few weeks,” he said. “We’ve had a good response from
our customers in Central America. Retail is obviously starting to lay down some orders there.”

Man-Made Fiber Getting Extensive

Cotton prices have stabilized and
found a temporary bottom. Man-made fibers continue to rise, and at least one spinner reported some
success in passing those increases along.

“Yarn prices are going down,” said a ring spinner. “People are wanting us to pass along the
cheaper raw material costs.”

He noted he is not yet processing the cheaper cotton, but the decrease in demand has given
buyers some additional pull on yarn prices.

“When cotton goes up, it is difficult at best to pass along the price increase, but
everybody calls when it goes down wanting to know when you are going to lower their price. It is a
classic one-way street,” he said.

Another spinner declared man-made fiber prices are getting up to a dangerous level. “It’s
going to start affecting consumption,” he said. “You’re at a level now where a spinner that’s been
polyester-rich starts converting back to cotton-rich in blends just because of the leverage. It’s a
bad thing for this market.”

No Tsunami Of Imports?

Spinners surveyed felt the 2005 textile quota phase-out will probably have a slow but sure
effect on business and will not turn into the tidal wave some fear.

“It is still unclear, but I don’t think you can come up with any scenario that would be
positive,” said a ring spinner. “I don’t think you will see a tremendous negative impact all at
once. It will be a gradual effect. I’m afraid it will further deteriorate prices at retail,
therefore creating a backward demand on the whole supply chain for lower prices.”

One industry observer warned that spinners who don’t feel their main markets aren’t directly
threatened by increased imports should realize that other domestic spinners with idled spindles or
positions in other segments will be shifting production wherever they can.

Billboard Campaign Strikes A Chord

Spinners were solidly behind the recent grassroots campaign kicked off in Greensboro, N.C., by
the American Manufacturing Trade Action Coalition, the National Council of Textile Organizations,
and the National Textile Association. The groups have rented 48 billboards in 32 communities. They
read: “Stop Sending Jobs Overseas. Fix Trade Policy Now! Register … VOTE!”

“They’re putting some pressure on Washington and are probably part of the reason the
government has done an about-face on safeguards,” said one spinner.

Another spinner liked the billboards, but was less upbeat about the likelihood of 11th-hour
political solutions.

“It’s a great idea, but it has to have some success,” he said. “Nobody can hold anybody
accountable for anything anymore. Look at the presidential race; both guys are saying the same
thing. We’ve got a system that is broken.”

November 2004