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Yarn Market
J. Karl Rudy, Technical Editor

Spinners Making Yarn, Not Money

By J. Karl Rudy, Technical Editor

E veryone from spinners to retailers are watching as the cotton markets continue their downward trend. Retailers, to see how much of a price advantage they might get from spinners because of it and spinners to realize that, if they can hold their pricing, they may finally make a profit.

Logical thinking would say that with the recent hurricane hitting the coast of Texas and decimating cotton crop there the cotton markets would open higher.

So, what happened? The markets opened lower. Why? According to the experts, the resulting rain in the Delta will improve the harvest, offsetting the losses in Texas.

All of this to show that not even the experts can understand the cotton markets. It does show, as well, man's ability to explain away just about anything. All spinners continue to complain about pricing, even those who report that their business is good.

One spinner of highly specialized yarns said: "Our markets for both open-end and ring-spun yarns are vigorous. We are making a lot of yarn but we're not making any money. Our markets are extremely competitive and, while the markets are active, they are also very volatile. As you know, this business is cyclical and can turn in an instant."

Ring Yarns Low

Yet another spinner commented their programs were continuing. He said: "If we add new programs, you almost have to take them at break-even or a loss position. Our ring-spun yarn business is so good we cannot accept any new customers. Demand is so good we can't make enough yarn, yet customers want cheaper yarns because of the low price of cotton. This won't happen because yarn pricing is artificially low today and therefore has no relationship to lower cotton prices."

Spinners of open-end yarns say that differentials in pricing by count are "out the window." You can no longer predict that an 18/1 yarn will sell for "x" cents more than a 10/1 yarn-you can sell it for whatever you can get at that moment in time.

While volume is quite good for spinners, there is still no long-term business. This is due mainly to customer's reluctance to commit for extended contracts because of the crazy pricing of yarns in the market place. Every spinner must recognize how the sale of yarn either below or at the cost of manufacturing adversely affects the entire market.

Like The Good 'Ole Days

One respondent to the Yarn Market commented that pricing today is like it was in the 50s. The Yarn Market report doesn't go back to the 50s, but records from January 1985 are revealing to say the least. For instance, a 10/1 100-percent, ring-spun cotton was selling then for $1.40 per pound. Today's price shows a range from $1.35 to $1.40.

A 30/1 cotton ring-spun yarn back then was selling for $1.66. Today's price shows a range of $1.65-$1.70.

On the other hand, looking at open-end yarn during this same period of time, we see something even more interesting. A 10/1 OE cotton yarn was selling at $1.21 per pound. Today the price is quoted at $.94-$.96.

A 20/1 OE cotton yarn is quoted today at $1.08-$1.10. In January of 1985 the asking price was $1.38-$1.42.

Synthetics Tough

Synthetic yarn spinners report that their markets are "tough" as well. One such spinner said, "Our business is mostly spot sales because there is really no forward business in present markets."

Continuing the comparison of markets in 1985 but for synthetic yarns instead of cotton, it was found that acrylics were currently priced lower in 1985 while polyesters are currently higher. As an example, a 1/12 (worsted count) is at $1.24-$1.27 today. Nearly 15 years ago it was selling at $1.37 per pound. An 8/1 polyester (whites only) is priced at $1.37 in this issue, while in January of 1985 it cost $1.20-$1.25 per pound.

The obvious conclusion is that there are many bargains to be found in present day markets, many well below the price quoted over 14 years ago.

The obvious question is how long it will be before enough spinners go out of business to allow the remaining spinners to raise prices to the level needed to stay in business.

October 1999