What A Difference A Year Makes

t doesn’t seem so long ago that spinners were looking anywhere and everywhere for any
business they could find. As second quarter 2010 begins, some spinners are finding they now have
more business than capacity. Demand for both ring and open-end (OE) is currently the strongest it’s
been in some time, spinners say. Prices are up, approaching levels that haven’t been seen for five
years or more.

Why such a turnaround — especially when things looked so bleak just 12 months ago?

“A lot of spinning has returned to this hemisphere,” said one rep who sells both domestic and
imported yarn. “And, due to the weak dollar and the need for quick turnaround, it looks like it is
going to stay around for quite some time.”

Said another: “Ring-spun yarns have been strong for quite some time. But now, we’re seeing a
big jump in OE orders. It looks like a lot of the T-shirt manufacturers may have let their product
pipelines run almost dry. The question is, when they get restocked, will OE continue its momentum,
or will it fall off to previous levels?”

Despite the healthy state of business at the moment, one thing is steadily shrinking, and
that’s the number of companies that are still in business. In January, banks seized Wellstone
Mills. With the demise of R.L. Stowe last year, that leaves Parkdale Mills Inc. as the sole
surviving large, diverse spinner. Overall domestic capacity, however, wasn’t significantly
impacted, as Parkdale acquired four of Wellstone’s plants.

Limited Retail Inventory Drives Business

Not only is OE seeing at least a short-term boom because of inventory replenishment, so are
other industry segments. Said one specialty spinner, “The apparent limited inventory positions
throughout the supply chain are a driving force behind the increased business opportunities within
this hemisphere.”

Business has been very good so far, and he is optimistic for continued success: “We are
confident that the encouraging business activity we are experiencing will continue throughout
second quarter.”

Products in high demand at the moment, especially in the specialty segment, are those that
offer some form of value add. “The markets that we serve are continually seeking to differentiate
themselves, which is extremely valuable for our R&D initiatives,” he said.  “Products that
offer either a sustainability or a performance attribute are in demand. Texture is also very a
desirable characteristic.”

Another spinner agreed: “We’re not running lots of the same things these days.  It seems
everybody wants something different.”

Raw Material Prices Escalate;

Demand Enables Pass-through

One element of the increased demand that has some spinners smiling is the ability to pass
through increased costs to customers. One spinner noted, “For a long time, we had to absorb a lot
of the increases in our cost of production. We, like a number of other spinners, were selling for
very low margin — and sometimes even at a loss — just to keep the order. Now, demand is high,
everyone is running flat out, and there is substantial business in the pipeline. We’ve seen prices
go up 25 percent or more, in some instances over the past few months.

For example, mid-last year, 30-count cotton ring-spun was going for about $1.45 to $1.50. Now
it is going for $2.05 to $2.10. The last time we saw those prices was 1999. I got up to $1.90 in
2005, but it didn’t stay there long.”

Even with prices going up, margins still are not where a lot of spinners would like, because
raw material prices are still escalating. “Raw material cost escalation has been a concern. We have
tried to work cooperatively with our customers to minimize the negative impact of higher yarn
prices,” said a Carolinas spinner.

The bottom line,” said an independent sales representative, “is that it is a spinners’ market
for now, and we haven’t had one of those in a long time. I hope it lasts awhile.”

April 2010