By Jim Phillips, Yarn Market Editor
As 2015 begins, the U.S. textile industry and its yarn spinners find themselves in a highly competitive global marketplace — one in which quality, customization and supply chain optimization are likely to play ever-more important roles.
Even though 2014 had more bumps in the road for some spinners than much of the previous two years, yarn manufacturers, overall, reported solid results.
“The first half of the year was super-solid,” commented one spinner. “The last half was a bit spottier — but it still wasn’t bad.” Added another spinner: “If 2013 was, say, an A, I would put 2014 at an A-. The order pipeline became shorter, but we still managed to stay busy.”
One spinner noted that the continuing decrease in cotton prices played a large part in the shorter order pipeline the last part of the year. “As cotton prices began dropping, I think a number of companies began aggressively moving any inventory that had been built up, temporarily saturating the market in some instances. At the same time, customers were acutely aware of falling prices and placed shorter orders.”
As has been the case for much of the past four or five years — mainly due to capacity — ring-spun yarns were in very high demand, and there were times, especially earlier in the year, where positions were hard to come by.
As one yarn broker commented earlier this year, “I’ve lost a number of contracts simply because I could not find the yarn. I have even had a lot of inquiries about OE yarn, and that usually doesn’t happen in my business. When customers are asking if I can find OE for them, I know that the market is very tight.”
Spinners Optimistic About 2015
Looking ahead, spinners say the conditions are conducive — barring unforeseen economic issues — for a very good 2015. “It looks like it could be a very solid year,” quipped one industry observer. “The economy is continuing to shake off the hangover from the 2007 recession, raw material prices are falling for many industry segments, and energy prices are decreasing.”
Another spinner said, “Cotton prices are falling to the point where we believe that some customers that moved to blends a few years ago might come back. Additionally, reduced fuel costs make it more efficient to get yarn to customers in both a timely and cost-efficient manner.”
Added one industry executive: “We see no reason for the momentum we have established over the past several years to slow. Our industry is in the midst of one of its most stable periods in recent memory. If this continues, it will provide only the opportunity to build profitability, but will also enable us to continue to invest in the most modern equipment. This, in turn, will further increase productivity and reduce costs for the manufacturer, its customers and the end-consumer.”
Despite the optimistic stance of many in the industry, several potential issues could create significant challenges by the end of the year. As advantageous as low cotton prices are for manufacturers and their customers, they can be devastating for cotton farmers. “The past year has not been a good one for cotton farmers,” commented one expert. “In fact, it was a bad year for many row crops. The likely outcome is less acreage planted in the next few years, which could eventually lead to a raw material shortage and sharply escalating prices.”
Additionally, the U.S. dollar has increased in value versus other currencies. Since June 30, the dollar has jumped 16 percent against the Japanese yen, 18 percent against the euro and nearly 20 percent against the Brazilian real. “This is a causing a significant hit in profit to those companies with substantial overseas business,” said one observer. “Additionally, it means imported goods can be bought even more cheaply in the United States, compared to domestically produced products.”
As a result, spinners agree that maintaining the competitive advantage of yarn produced in the western hemisphere will be contingent upon maintaining superior quality, creating innovative new products and maximizing the inherent advantages of the domestic supply chain. “Going forward, quick-turnaround and delivery of superior products will be our best weapon in an environment in which pricing could be a major issue.”