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Yarn Market

Some Signs Of Improvement

Jim Phillips, Contributing Editor

M aybe, just maybe, there is some light at the end of the proverbial tunnel.

Even though US industrial production continues to decline - as it has for almost every one of the past 15 months, there are some signals that, while still far from over, the momentum of the recession is slowing. Retail sales for March are expected to show some moderate growth. Permits for single-family housing construction in February, according to the US Department of Housing and Urban Development, increased 11 percent from January. And Gallup recently reported that consumers' attitudes about the economy improved in early April.

So, what does this small dose of generic good economic news mean for spinners?

"Well, I can't exactly say business is good," said one manager from a North Carolina operation. "But I can say it is a heck of a lot better than it was just a month or two ago - and better than we expected it would be just last month."

The business that is coming is short runs, he said, "and I don't anticipate that changing any time soon. Our customers are buying just what they are sure they can sell, no more and no less. And if you've been in a department or discount store lately, I'm sure you've noticed the number of clearance items and the relative scarcity of new fashions. They are there, of course, but just not in the numbers as in years past. This time last year, around the Masters golf tournament, I could walk into any apparel store and there would be rack after rack after rack of name-brand golf apparel. Now, though, instead of 15 shirts of the same color and size on display, there might be five."

He continued: "Right now, we've got enough business to keep us running a relatively normal schedule, but it is still week-to-week. We've already taken one week off this year - and we may have to do it again."

A Southern heathers spinner also said the past few weeks have shown improved activity. "Fortunately we have noticed a moderate improvement with order activity since late February," he said. "Naturally, the business development is directly related to response, whereas the delivery threshold has narrowed."

The same spinner noted a few months ago that many customers had experienced credit issues, which, in turn, caused cash-flow problems for the spinners. But that area, too, has improved. "Our accounts receivable management became a significant issue during the past quarter, and we are pleased that this concern is greatly improved."

A Little Optimism ...
Overall, spinners are somewhat more optimistic about the coming months than they were just a short time ago. "We are optimistic that we will experience continued business improvement into the second quarter due to limited inventories of saleable merchandise and the anticipated gain with consumer confidence," said the specialty spinner.

Central America continues to drive increased business for the majority of spinners interviewed. "Our business activity is strongly influenced by the business demand from Central America. In South America, I anticipate that Peru will eventually develop into a more important customer base for US spinners."

The business pipeline still remains considerably short of the comfort zone for many spinners, but there is increased activity for at least some. "The inquiry activity has improved since earlier this year, which has enabled us to improve our production scheduling," said one spinner. However, he noted that orders are not to the point that his company has been able to resume a normal operating schedule. "Realistically, I'm not sure that we understand what a normal schedule is anymore," he said.

... And A Lot Of Uncertainty
A Georgia spinner said his company has struggled, but still has enough business to operate normally ... barely. "We are running full, but orders are day-to-day," he said. "Business has pretty much remained the same for us over the past few months. Perhaps things never got as bad for us as they did for some, but we are well behind where we had hoped to be. Business hasn't improved, but thankfully, it hasn't gotten any worse. We're still running seven days, but we are having to change a good deal. We anticipate staying on seven days, but we're having to shake a lot of bushes to do it."

It's difficult for many spinners to easily pinpoint those products that are selling well. "It's really been a mixed bag," said one. "Nothing is moving consistently."

Added another: "We are constantly changing as orders come in. Orders are very, very short. We have no more than two or three weeks of orders in the pipeline. And I don't think I would call any of our products hot. Some are warm, most are cold."

As far as what customers are looking for in the products they are ordering, nothing much has changed in the past few months. The focus is on price and value added. "Obviously, they want us to sell yarn to them for less than it costs us to make it. But there is nothing new about that," quipped one spinner.

Said another: "Value-added products are increasingly important for retail merchandisers, which relates to more opportunities for yarn producers capable of offering character, color and unique blends."
While the past 30 days haven't been anything to shout about, many spinners agree it hasn't been as bad as they had earlier feared.

"And now," said one, "we are just keeping our fingers crossed."


April 14, 2009

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