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Yarn Market
Jim Phillips, Contributing Editor

Fiber, Yarn Pricing

Jim Phillips, Contributing Editor

H it hard in the past six months by cost increases, yarn and fiber producers have begun passing costs through to customers, but price increases are still lagging behind the escalating cost of materials.

The recent skyrocketing petroleum prices have been a punch in the gut for many manufacturers, particularly man-made fiber producers.

“It’s been unreal,” said one producer.  “We’ve had to raise prices by 4 to 8 cents a pound, and that doesn’t even get us to the break-even point.”

One major fiber producer, Charlotte-based DAK Americas, announced a 4-cents-per-pound increase in polyester staple fiber, effective June 2.  Overall, polyester staple prices are up about 14 cents per pound from a year ago.

Cotton prices, after almost six months of continuous increase, have begun to edge downward.  Spot market quotes are, on average, 5-cents-per-pound lower than this time last month.

“Cotton prices have come down because demand has decreased,” said one spinner. “The price had gotten to the point where it was just not profitable. Most spinners, I believe, are buying a lot less cotton than this time last year.”

His observations were confirmed by the US Department of Agriculture, which reported spot trading to be slow in late May, with both demand and offerings lower than in past months.

Even though yarn prices have edged up as well, spinners interviewed this month do not see them coming back down soon.

“If cotton continues to hover right around 60 cents per pound, we can now realize a little margin.  Prices are now where they should have been six months ago,” said a spinner in North Carolina.

Exports And Running Conditions

Domestic demand for yarns remains relatively soft, as spinners continue to see an erosion of their customer base.

“As I’ve said many times in the past, our biggest problem is that all of our customers have disappeared,” said one spinner. “We’ve had to look hard for opportunities, particularly in Central America. However, to be successful, you have to focus on lead times and customer service.  Getting the right product to the customer at the right time is vital — to the point where price, while always important, is almost secondary.”

Spinners describe running conditions as moderate, in general.  However, business is booming for some specialty spinners, while several ring spinners have had to adjust capacity downward.

“We have a few markets where we are one of only a very few players, and we have increased capacity for specific fibers and blends,” said one specialty spinner.  “Along with our excellent capability for fast turnarounds, our increased production capability puts us in good shape to continue to meet our customers’ demands.”

However, he added, demand hasn’t been so strong for ring spinners, although they note business is generally better than a year ago.

“We don’t have the production we did a few years ago,” he said. “We have had to consolidate operations and adjust our capacity to the new demand dynamics.  We’re running pretty well right now, but it’s because we finally have our business aligned with the market.”

One open-end spinner noted that the T-shirt market for his company has been a little slower than anticipated. However, an increase in demand for other apparel yarns has helped offset this.  “One of the advantages of being small and flexible is the ability to quickly respond and deliver what the market demands.  We’ve been able to do that and it has greatly benefited us.” 

The Dollar

An issue almost all spinners are watching closely is the value of the US dollar.

Said one spinner: “It should make us more competitive with producers from around the world.  I am interested to see just how this plays out.  We’ve thought market conditions should have been in our favor at times in the past as well, but somehow it just doesn’t ever work out that way.”

Energy Costs

The rising cost of energy has most spinners concerned.  As margins are typically razor-thin in the best of times, the record crude oil prices have impacted operations in a significant way.

“Just when it seemed we were able to establish some equilibrium in materials and products prices, along came record oil prices,” noted one spinner.”  This is going to be bad for everyone if there is not some stability in the near future.  We’ve already raised our prices to what we think the market will support.  We don’t have any wiggle room.”

June 11, 2008

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