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Yarn Market

Business Good, But Outlook Guarded

Jim Phillips, Yarn Market Editor

A s the second half of 2011 gets underway, yarn spinners report generally good business conditions. However, the unbridled optimism running through the industry just a few months ago has been replaced with a more guarded posture.

"Business is still good, but it isn't what it was," said one spinner. "There are a lot of questions out there right now right now, but not a lot of answers.  It seems no one knows exactly what the last half of the year will bring."

Said another spinner: "We have orders in the pipeline, but demand is certainly down. The sense of urgency everyone felt a few months ago is gone. Now that there is both product and availability in the market, everything has settled down."

"I'm really not sure what to expect over the next few quarters," said a Southeastern spinner. "It really depends on a lot of things - pricing, availability and cost of imported yarns, what's going on in Washington, the debt ceiling, and so on. A lot of things are up in the air right now that could have a significant impact on the state of the business going forward."

Cotton In Free Fall
The price of cotton continues to tumble, down to just over $1.26 per pound in early July. Cotton prices alone show how tumultuous business conditions have been over the past year. Twelve months ago, the price for base quality of cotton was under $0.75. By late in the year, the price for the same cotton was up over $1.80.

"As you can imagine, the drop in cotton prices has put tremendous pressure on the U.S. industry to drop yarn prices," said one spinner. "But, in a lot of cases, we're still selling the cotton we bought for a lot more money."

Capacity Available
At the year's mid-point, spinners are reporting they have capacity to accept new orders and turn them in a timely manner. Said one spinner: "Earlier in the year, we really didn't have much room at all.  It seems there was a bit of panic buying at that time. Customers were afraid that with prices so high and product so scarce, they wouldn't be able to get what they needed if they didn't place long orders. Today, things are still steady, and we have the room do take on new business and get it delivered."

Overall, most spinners are still optimistic about the remainder of the year. But, they warn, so much is uncertain at the moment that their assessment could change literally overnight. As one spinner said: "I am not sure we are close to those times when we were scrambling around week to week to find short runs of business. But we need to be prepared for any way the market goes from here. We need to be ready for the unexpected."

One spinner said: "There's one thing to watch out for: So far this year, we've been pretty competitive in price with yarns from Asia. But we already see those prices dropping a lot. It's going to be tough if a big price gap develops between yarns made in this hemisphere and those made in Asia." 

July 2011

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