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Yarn Market
James L. Lemons, Ph.D., Technical Editor

Try A Different Twist

James L. Lemons, Ph.D., Technical Editor

P lease excuse the pun, but numerous spinners feel the survival of their companies may depend on their ability to “try a different twist.” That is, yarn manufacturers are rapidly trying to find a niche market they can penetrate. The current emphasis is toward innovative or value-added yarns and away from commodity products. As one spinner said: “We know we can’t compete against China where cost is the most important consideration. We are looking at new products aimed at new markets.”

There are some real success stories out there for companies that have found their niche. This niche may be in the form of extreme counts, multiple fibers, effect yarns, or any other variation that gives that spinner a somewhat unique product. The spinners that have devoted the time, effort, and resources to bring these niche products to market deserve to reap the rewards of their ingenuity.

However, therein resides the danger of attempting this strategy. Often, just when a spinner begins to reap the rewards of its investment, it seems everybody wants a “piece of the action.”

The problem with most specialty-type yarns is volume. As one vice president of manufacturing indicated: “Price per pound is not the issue. The difficulty with this type of business is having multiple SKUs and shipping 1,200-pound lots.” The demand for many specialty yarns seems sufficient to keep one or two plants running at capacity. But, when multiple players try to enter the market, the specialty yarn becomes a commodity, and everybody loses.

However, the strategy of investing in the development of innovative products seems to be a viable alternative to what often appears to be a losing battle to commodity imports. As one CEO said: “We have been forced to examine the way we do business. Product innovation is going to be the key to our survival.” Another spinner said: “We have spent most of our time trying to shave our costs a few cents a pound — then we look up and see yarn being sold at below our cost. I think the only way to survive is to differentiate our products from the crowd.”

China's Currency Manipulation
The Bush administration finally has acknowledged that China’s currency manipulation has led to massive losses of US jobs. Last month, Bush pressed this issue to little avail in his meetings with Chinese President Hu Jintao at the Asia Pacific Economic Cooperation Forum. The previous month, Bush dispatched Treasury Secretary John Snow to put pressure on the Chinese government to let its currency float,as opposed to pegging its value to the dollar. This request met with immediate rejection, as the Chinese government contends the world actually benefits from a stable yuan. It seems some currency speculators are betting that China may have to cave in to pressure based on the fact that Chinese currency futures have risen by 6 percent for June of next year. The speculators feel China’s tremendous export advantage is strong enough to absorb the effects of revaluation.

Congress is also trying to get into the act by threatening to pass legislation that would impose tariffs equal to the amount of the currency undervaluation, currently estimated to be as much as 40 percent. It seems the stepped-up pressure from the textile coalitions and major lobbying groups has finally produced some results. A textile executive responded, saying, “The folks on Capitol Hill realize that there is going to be a tremendous voter backlash in 2004 if they don’t get their act together.”

It also seems the Bush administration is listening to manufacturers concerning the negative impact from the strong dollar over the last three or four years. The strength of the dollar can be attributed partially to the currency intervention by Asian central banks. By pushing for market-determined exchange rates, the administration is sending the “subtle” message that it will do nothing to intervene in the dollar’s slide, which, for example, has resulted in the dollar falling to a three-year low against the Japanese yen.

At the same time, Secretary Snow is making announcements that the administration has not changed its fundamental policy favoring the strong dollar. Obviously, Bush is attempting to satisfy manufacturers without publicly stating a shift in policy.

November 2003

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