Orders Still Coming In; Spinners Look To Innovate

As the end of the third quarter approaches, demand remains strong for many spinners, as has been
the case for most of the year.

“We are still seeing very strong orders for ring-spun cotton yarns,” said one yarn broker.
“It’s been that way since the middle of last year and shows no sign of slowing anytime soon.”

A spinner added: “We are continuing to see increased demand for many types of yarns. With
ring-spun availability tight, a lot of customers are ordering more blends and synthetics.”

For the first time in years, yarn manufacturers have had stable business conditions for an
extended period. In recent times, periods of high demand and high prices have been quickly followed
by a precipitous drop in both. “For the past 14 or 15 months, we’ve probably had more alignment
with demand and capacity than we’ve had in quite a while,” said one yarn buyer. “I can buy anything
I need right now at a reasonable price. I might have to wait a bit longer for some products, but,
at least for the present time, this has not been a big issue. Stability has been what the industry
has needed for a long time, and our hope is that it keeps going this way.”

Industry Can’t Afford Complacency

While stability is what the industry has sought for so long, one industry observer warned
U.S. textile manufacturers not to become complacent: “It is easy for anybody to relax when things
go well for a while. But the textile industry in the United States cannot afford to do that. China,
for example, has a huge cotton reserve, and has the capacity, if it wants, to flood the market with
low-cost products. Other nations – Vietnam with its apparel capacity, for example – can impact
global demand and prices as well.”

He continued: “For U.S. manufacturers, it is important to keep their eyes on the ball and
continue to invest in doing things that create real differentiation, such as speed to market,
product diversity and superior quality. These are the things, in the end, that will keep the U.S.
competitive, regardless of what others do.”

Innovate To Differentiate

Added a spinner: “We need to keep investing in the industry to make sure we can do things
better, more efficiently and with better quality, while still maintaining some degree of price
competitiveness. Right now, I like how our industry is positioned, and if we can convince our
government not to give away the store, I think the industry could be primed for a period of

Product diversity, along with expedited delivery, remain the keys to success, spinners and
industry experts agree. “It’s important that we keep looking at the market and see where we can
establish a unique position,” said one specialty spinner. “Our goal is to make products that no one
else can or will. It keeps us running steadily. Our margins have been strong because our customers
cannot get our products from anyone else.”

Added another spinner: “We have become masters of the quick change. Over the years, as
customers have been demanding more and more specialty products, and making shorter orders in the
process, we have learned how to do short runs efficiently. It is way different from the days when
we just tried to run as much and as fast as we could. The market just doesn’t work that way

Adapting to demands of today’s global economy hasn’t been easy for an industry once tied to
a single business model. “It was just a matter of survival,” said one yarn broker. “Many of my old
customers have gone away. We had to look for suppliers that were willing to do things a bit
differently. We knew we were never going to win on price alone, but there are other ways –
innovation, quality and delivery, for example – where we can compete with anyone.”

Cotton Prices Inch Down

Average spot cotton quotations for the base quality of cotton – color 41, leaf 4, staple 34,
mike 3.5-3.6 and 4.3-4.9, strength 27.0-28.9, uniformity 81.0-81.9 – in the seven designated
markets measured by the U.S. Department of Agriculture averaged 84.38 cents per pound for the week
ended August 22, down from 86.63 cents the previous week, but up from 70.90 cents reported for the
same week last year. Prices have remained relatively stable for most of 2013.

September/October 2013