A Not-Too-Positive Start
Robert S. Reichard, Economics Editor
Import Question Marks Persist
Imports also remain a headache. True, incoming textile and apparel shipments on a square meter equivalent (sme) basis have flattened out in recent months. But this is primarily due to weak domestic demand rather than to any changes in the overseas competitive advantage. Indeed, textile imports from such large Asian suppliers as Pakistan, Thailand, Taiwan and Indonesia have actually increased over the past year. On a rosier note, the American Textile Manufacturers Institute (ATMI) is stepping up its fight for relief — in the form of promises from both the White House and Congress to (1) ease domestic access to foreign markets, (2) assure that CBI fabric dyeing and finishing operations be done in the United States, (3) take more steps to prevent customs fraud, and (4) allow domestic mills to purchase cotton at world prices. But how much of all the above the industry actually gets remains to be seen.
Some Turnaround Seems Likely
Meantime, no one foresees a repeat of the past year, when domestic mill shipments dropped an eye-opening 12 percent (more than double the all-manufacturing average decline) — with textile employment also down by an almost as impressive 9 percent. For one, the general economic outlook, while hardly buoyant, isn’t nearly as gloomy as it was a few short months ago. Indeed, both the textile and apparel demand curves — given forecasts of a modest spring business upturn — may be ready to bottom out. Also suggesting better days ahead are the final results of the recent holiday season, when most apparel retailers — despite gloomy predictions — managed to eke out small gains. Somewhat lower inventory levels up and down the production and distribution pipelines would seem to be a positive sign, too. And, last but not least, consumer confidence seems to be recovering. In any event, Textile World remains confident of a mill pickup — with industry production expected to slip back into the plus column — if not now, then certainly by midyear.
Mill Quotes Equally Weak
Fabric prices, impacted by the same market pressures, are also on shaky ground. TW ’s all-mill average is lagging year-ago levels by about 1 percent (see chart). Zero in on greige goods, and the decline is more in the order of 2 percent — with some specific constructions off by a lot more than that. Nor is any significant near-term recovery anticipated. Specifically, overall mill averages are expected to inch up by less than 1 percent over the next nine to 12 months. But given (1) the absence of major cost pressures (labor as well as fiber) and (2) some modest volume uptick as the year wears on, this gain should be enough to permit some fractional gains in both mill earnings and margins. Indeed, one 2002 Business Week forecast covering five large companies sees earnings per share rising — from 73 cents in 2001 to $1.09 for the current year.
Fiber Markets Present No Problems
Relatively low fiber costs also augur well for the mill outlook. Raw cotton, for example, shows little or no sign of moving out of the current low 30s range. That’s about half the level prevailing in late 2000. Oversupply is behind much of the weakness. The end of the 2001-2002 marketing year surplus, for example, is expected to be up 2.7 million bales (to 8.7 million). World stocks are targeted to rise by an even more impressive 5.5 million bales. World cotton demand, meantime, continues to drag — declining fractionally now for two straight years. Upshot: raw cotton tags are likely to remain shaky — with little chance of any meaningful near-term rise. Man-made fiber quotes — also struggling with global overcapacity and lackluster demand — aren’t going anywhere, either. At last report, tags here were averaging 1.5 percent under a year ago.
Download Current US Textile And Economic Indicators.