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Yarn Market
Jim Phillips, Contributing Editor

Spinners Still Focused On Cost

By Jim Phillips, Contributing Editor

T he last part of the fourth quarter of 2007 and the first quarter of 2008 have created some pleasant surprises for a number of spinners, particularly those in specialty markets.

“We’ve been real pleased with the activity in our business,” said one North Carolina spinner. “The fourth quarter was unexpectedly good, being as busy as we were, and it’s carried over to the first quarter. From a volume perspective, we are very pleased.”

“We really didn’t see as much ramping up as we expected early in the fourth quarter,” said another Southeastern spinner, “but it began to pick up in December, and we’ve been looking better than projected for the first part of the new quarter.”

Cost, however, continues to be a concern for spinners as fiber prices have fluctuated substantially over the past few months, decreasing slightly for the first time in a while toward the end of the year, but then beginning to increase again at the start of 2008.

“It’s a constant struggle right now, “ said one spinner. “We keep trying to balance our increasing costs with what we think the market will bear in terms of increasing our prices to customers.”

Added another: “We been able to pass through some of our costs, but we just haven’t been able to do it quickly enough, quite frankly. It’s easier when you’re pricing a new product for a customer. But, when you try to raise prices on existing products, you tend to get a lot of resistance. We were able to pass along in the fall some of our anticipated increases in fiber costs. But in reality, the real costs continued to rise, so in January, we had to bump prices again.”

Another spinner noted his company was having issues in trying to pass costs along to customers. “We’re trying to pass these increases on, but it hasn’t been easy. We feel like we should have more room to pass some of these increases along, since the increase in cotton prices should be affecting spinners in all parts of the world. But some of our foreign competitors, because of lower labor costs, seem to be in a better position to absorb the increase in raw material costs. That makes it awfully tough for us have any kind of margin at all.”

Much of a spinner’s success in recouping some of its increased fibers costs is associated with the types of customers it is working with. “We’ve been able bump prices for some of our customers, generally those that don’t buy in too big a volume. But, with some of our bigger customers, it’s like trying to move a mountain with a shovel. You’ll get there eventually, but in a lot of baby steps. We’ve moved prices up for these customers, but by a much smaller percentage than we need.”

Growth Focused On Partnerships

Despite the current cost crisis, many spinners are finding opportunities to grow their businesses. But, the method of growth differs substantially than in years past.

“Historically, we would buy new machinery or build a new facility if we were looking to expand,” said one ring spinner. “But now, we focus on where we can add resources without adding debt.”

Said another: “A lot of our growth comes from joint ventures with other retailers, apparel manufacturers, textile companies or yarn spinners, as opposed to doing it internally. As we look at ways to grow our business, we’re always keeping in mind how to develop partnerships that can be advantageous to both parties. Just recently, as a matter of fact, we began working with a customer in this hemisphere who is importing product from China. Just the fact that we’re talking about shipping our product to China and then having it come back here for finishing is pretty unique. It’s not something I would have dreamed could happen a year ago.”

Another ring spinner added: “We have increased production of a specific product by 10 percent through a strategic partnership with another yarn spinner. We utilize our expertise, which happens to be blended fiber, with their expertise, which happens to be fine count, ring-spun yarns. Through this relationship, we have expanded the availability of a fine-count, ring-spun heather yarn down to the Central American market, which is supporting a market demand we had previously chosen not to pursue because of the cost we anticipated would be involved. It has increased business for both of us.”

So, as spinners get well into the first quarter, there is some optimism. Despite the increase in prices for raw materials, orders are up for many, production capacity is being used, and there continues to be opportunity for those willing develop new products and enter new markets.

February 12, 2008