Yarn Mills Run Strong

pinners, mainly with ring and open-end (OE) systems, report they are running at or near

“We are running at full capacity with good demand and a strong backlog,” said an OE spinner. “
The apparel business was the strongest segment during January. The weaving and upholstery
businesses are good for us, as well as yarns for package dyeing. Yarns for the automotive market
are slow at this time.”

“We saw the usual slowdown during Christmas and gained a little bit of inventory,” said a
multisystem spinner. “We came back to normal operations the second week of January or so. We are
basically selling what we are making.”

Q1, Q2 Look Solid

Carded and combed ring-spun yarn demand is steady. Military orders have materialized, increasing
nylon yarn production. The OE market is tight; customers are fishing around for additional

“Our strongest quarter traditionally is the second quarter,” said an OE spinner. “I am
pleasantly surprised with our business for the first quarter, as it is normally quite slow.”

“Business looks pretty good through the first quarter and probably into the second quarter. I
have no clue beyond that,” said a ring spinner.

While the T-shirt market usually starts around March or April and runs pretty strong through
the first of the summer, it looks like it may be starting a bit early this year.

“We are still very positive,” said a multisystem spinner. “We are still not sure what the
impact of the elimination of quotas will be. Our business continues to be strong. It has lightened
up a bit on the weave side, but the knitters continue to be extremely busy.”

Spinners surveyed this month reported doing some export business, primarily to Central
America. One said exports to the Caribbean Basin region accounted for about a third of his company’s

Pricing Paradox

Cotton fiber prices have stabilized and are not expected to rise anytime soon because of
projected oversupply. Spinners continue to keep their eyes on man-made fiber prices. They report
polyester prices have stabilized, but have not come down. This has really squeezed the mills since
it’s next to impossible for them to pass on the increase to customers.

“Man-made fiber prices have to stop somewhere,” said a ring spinner. “At some point, it is
going to price itself out of the market.”

Yarn prices, on the other hand, have come down substantially since Christmas, along with
decreases in cotton prices. At the same time, spinners have struggled to hold pricing high enough
to cover polyester price hikes. The consensus seems to be that yarn prices are stabilizing.

“We were able to hold some of our prices due to polyester price increases, but it goes up in
pennies and comes down in nickels and dimes,” said a multisystem spinner.

Waiting To See On Safeguards

Mill executives want to see the threat-based China safeguards initiated but have some doubts
about the US government’s commitment to them.

“Unfortunately, the retail industry has managed to get an injunction to halt the China
safeguard issue — at least for now,” said an OE spinner. “Without the safeguards, we are looking at
some devastating consequences for US textile mills, as well as most other manufacturing sectors in
the United States.”

“I don’t think China safeguards or any other governmental action is going to have much of an
impact,” said a ring spinner. “If you are going to survive, you better do it on your own, and don’t
look for Big Brother to help.”

18-Million Bale Crop Projected

US cotton producers intend to plant 13.7 million acres of cotton this spring, up 0.6 percent
from 2004, according to the National Cotton Council’s 22nd Annual Early Season Planting Intentions

Upland cotton intentions are 13.5 million acres, an increase of 0.5 percent over 2004
plantings. Extra-long-staple (ELS) intentions of 255,000 acres represent a 2.3-percent increase
over 2004. This would yield an estimated 18.2 million bales of upland cotton and 691,000 bales of
ELS cotton, compared to 2004’s total production of 23 million bales, according to the US Department
of Agriculture’s estimate for January 2005.

March 2005