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Yarn Market

Spinning Resurgence Continues

Jim Phillips, Yarn Market Editor

S pinners continued to enjoy robust business through the middle of the third quarter, with both ring-spun and open-end (OE) moving well.

"We're continuing to run at full capacity, which, frankly, is a bit surprising," said one spinner. "We expected a bit of a falloff as retailers got product back on their shelves, but that hasn't happened. We have a healthy order pipeline and are filling orders as fast as we can. As has been the case for much of the past year, orders tend to be smaller than we would like, but there is certainly no shortage of business."

Another specialty spinner agreed: "We're running flat out, and we're running lots of different things. Everybody wants a little of something, but very few customers seem to want a lot of anything."

A Carolinas spinner noted: "We've had some capacity to take on new orders off and on through the second quarter and the first part of the third, but it has been limited. Now, we're doing all we can to fill our existing orders in a timely fashion. Delivery schedules are slipping out to where they haven't been in a long time. Customers are used to getting their orders within a week or two, and now they have to wait longer, often as much as four to six weeks."

One industry observer speculated that the continued strength of orders might be attributed to customers who have no immediate need, but want to keep their positions with their partners of choice. "Honestly, I thought a lot of it was just speculating on forward business and that customers were just trying to make sure they had order positions with spinners," he said. "I thought we would see a lot of order cancellations in the third quarter, but that apparently hasn't happened."

Seller's Market
Understandably, not everyone is overjoyed by the increasing backlog in orders. "I've got customers and I've got orders," said one yarn broker. "What I don't have is yarn. With the way the market is right now, you just have to get in line. It's definitely a seller's market, and mills, obviously, are going to service their biggest and most loyal customers first."

He added: "I think some spinners thought business would weaken a bit in the third quarter, and they took on new business they ended up not having the capacity to meet. That created a huge bottleneck."

Another yarn buyer said: "We're buying a lot of both ring-spun and OE yarns. But there is just a limited supply, and lead times are long. The shortage is not just in one area, either. It's across the board. We have a shortage of combed ring-spun, carded ring-spun, natural OE, OE heathers, just about everything. Yarn supply is to the point where we have no way to meet short-term demand. We can meet long-term demand - maybe - but suddenly, short-term demand is very, very difficult."

Raw Material Prices Escalating
Complicating the already tight market is the shortage of cotton fiber. "There's a very tight supply of cotton," said one yarn buyer. "That has certainly impacted the running schedules of some spinners. I have one spinner that supplies me that cannot run on a full schedule right now. They have orders, they just don't have fiber. Part of the reason might be that they just aren't willing to pay the prices for the materials. The basis point for cotton fiber is huge right now, and some spinners may not be able to pass those increased costs along to their customers. All I know is I am not getting yarn like I am supposed to."

Partnerships More And More Important
Given the current yarn availability and the continued prospect for tight supply and extended delivery times, both spinners and buyers are recognizing the need to become more integrated into the supply chain. "From a sourcing perspective, it is time to develop customer relationships with the intent to improve communications and forecasting. We should look to become more of an integral part of that supply chain so lead-time issues do not drive business away from this hemisphere," said one yarn broker.

"From a selling perspective, there are opportunities to pick your partners and grow with them," he added. "As they continue to look
to produce at least some of their products outside the United States, we need to look at how we can remain part of their supply chain and be an important vendor, regardless of where their production may be."

September/October 2010

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