Yarn Market: Strong Close To 2015 Expected

By Jim Phillips, Yarn Market Editor

Yarn spinners report continued strong sales in mid-October, continuing a sustained period of prosperity that stretches back more than 36 months. And they see no end in sight.

“We expect business to be robust through the end of the year and into the first quarter of next,” commented one Carolinas spinner.  “Unless there is a drastic and unexpected downturn in the economy, we have no reason to suspect that business volumes will decrease.”

Further, with continued declines in raw materials and costs — cotton and energy, for example — spinners are realizing increased margins.  “There have been no severe price pressures from customers,” said one yarn broker.  “We have been able to keep prices relatively stable, so we are not seeing the hesitance to pay a fair price that customers would exhibit when material prices were so volatile.  Now, with 60-cent cotton, we can generate a little more return, which then gives us an opportunity to reinvest in our business to create more efficiency and value for our customers.”

Added another spinner:  “Ring-spun yarns continue to be high demand, as they have been all year.  For many customers, they are happy just to have a position.  And if they don’t, they are finding yarn somewhat hard to come by.  And if they only have small orders here and there, good luck to them.  They may have to wait quite a while and then pay a premium for it.”

One major difference between the current run of prosperity and those in the past is the size of orders.  “Even though we are running full, the size of orders hasn’t increased much since the last depressed period,” said one specialty spinner.  “Everyone seems to be ordering in small lots, and there is a lot of changing out.  At the same time, this bodes particularly well for spinners in the western hemisphere that can process and deliver orders quickly.  It gives us a significant advantage.”

TPP Stage One Complete; What’s Next?
The 12 nations involved in the Trans-Pacific Partnership (TPP) trade pact finalized the agreement in early October, concluding more than eight years of intense and sometimes volatile negotiations.  Earlier this year, the U.S. Congress gave President Obama authority to fast-track negotiations.  Even though the agreement has been signed, it is still far from being official.  The appropriate governing bodies of each nation must ratify the agreement. In the United States, TPP must be approved by Congress.

“I expect getting the agreement through Congress is not going to be an easy task,” said one informed observer. “This is a huge agreement that has been negotiated in secret for almost a decade. Only a handful of people actually know what is in it. Are there adequate protections for the textile industry? We just don’t know, right now. Without them, however, U.S. yarn spinners could be negatively impacted.”

Textile leaders have maintained that an approved agreement must include a yarn forward rule, which means that from yarn on, each step in manufacturing must be completed by a member nation. Vietnam, however, proposed that no such rule be included, opening the way for Vietnam to ship apparel with Chinese yarn.  China is not a TPP member.

“Without a yarn-forward rule, the TPP would be devastating to U.S. yarn spinners,” said one industry executive.  “It would destroy all the progress we’ve made in rebuilding this industry and threaten the very existence of U.S. manufacturers.”

Specific provisions of the TPP – such as the presence of yarn forward and its enforceability – are not yet known, but should be revealed shortly.  What is known is that the Obama administration made some last-minute concessions to get the negotiations concluded.  Yarn Market will continue to report on TPP as it goes through Congress.

Cotton Dips Below 60 Cents
Spot cotton quotations for the base quality of cotton (color 41, leaf 4, staple 34, mike 35-36 and 43-49, strength 27.0-28.9, uniformity 81.0-81.9) in the seven designated markets measured by the USDA averaged 59.72 cents per pound for the week ended October 8, 2015. The weekly average was up from 58.82 cents the previous week, but, but down from 64.11 cents reported the corresponding period a year ago. Total spot transactions for the season were 49,972 bales, compared to 67,254 bales the corresponding week a year ago.

October 2015