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Yarn Market
J. Karl Rudy, Technical Editor

Catch 22 For Open-End Spinners

J. Karl Rudy, Technical Editor

A Yarn Market respondent this month began philosophizing about the state of the textile industry - mainly because his company recently closed its doors after 100 years of supplying domestic textile products.

Speaking primarily to the open-end (OE) producers, he said, "The industry better be careful, or the same thing that happened to ring-spun (RS) spinners will happen to them. Prices got high enough to be attractive to overseas producers. They began flooding the market, and prices of RS yarns, profitable for several years, began to fall. With OE markets improving, prices are up. Overseas competition will want a piece of the pie."

As you all know, importers have had very little interest in OE yarns over the past few years - there was simply no money to be made. We are in a "Catch 22" situation. If the OE spinner gets his pricing high enough to make a decent profit, he loses his market to an overseas producer.

Another spinner bemoaned the fact that heirloom-quality fabrics were no longer of interest to what he called the Walmart mentality of merchandising - "make it in volume, make it cheap and he who makes it the cheapest gets the business," resulting in expensive garments being made of "cheap" fabric.

Textile History Lesson
Unfortunately, we in textiles have the history of finding a profitable product, expanding production until we flood the market, then wondering why suddenly customers no longer want the product.

Do you remember the ever-increasing number of ring spindles being replaced by rotors? Everyone, including weavers, put OE spinning in place until the market was so saturated that a weaver could buy yarn cheaper than he could spin it. Fortunately, there were no exports to contend with because it wasn’t a profitable product. If there had been, domestic OE spinners would have been put out of business months ago. Then, as you know, consistent low pricing and imports from other segments of the market drove many spinners out of business, and weavers began closing their OE operations to buy yarn from spinners.

The folks in the cotton business are pessimistic about pricing projections for cotton fiber. One respondent complained, “The markets for cotton are pitiful. We have had seasonal lows for the last six days.” This was, of course, not bad news for the spinners, but they can sure sympathize with the farmers. This respondent went on to say, “The world outlook for cotton is definitely bearish … with both demand and exports down, we expect low cotton prices to continue.

“March is usually a volatile period in the futures market, and we don’t really know how the stock market and customer confidence levels will affect these markets.” None of this really matters because if cotton production attains the projected levels there will be an oversupply of the fiber and prices will stay low.

An Optimistic Note
Another spinner said, when told of the aforementioned comments, “I don’t share those feelings. I think the second quarter is going to be good for spinners. Supply is down in nearly all of our market areas, and demand is up. Prices are moving up and holding. As for the price of cotton, we do not price yarns on the price of cotton. We couldn’t raise prices when cotton was a dollar a pound. We price yarns based on supply and demand.” He ended the conversation by saying, “ Things are definitely going to pick up!” Would you call that optimistic or what?

Spinners report that OE pricing is better and holding — “so far,” as one spinner put it. He added, “It’s holding for the first time in five to six years. Our knitting business is better, and it looks like weaving, although sluggish right now, is beginning to pick up. Denim is doing pretty well today, but denim, as you know, comes and goes.”

The same spinner, commenting later on the condition of textiles in general, said, “A lot of people in this business are scared to death. They are not in good financial shape and feel uncertain about the future of textiles.”

Saving Textiles
Many in textiles have decided to change the way they do business. Recent changes include the stepping aside of old, established management personnel for younger people with fresh ideas, removing the company from the public sector back to private ownership, or simply reducing the size of the company. History has shown that innovation comes from smaller companies with entrepreneurial leadership. This is what we need to save the textile industry from itself.

April 2001

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