NEW YORK -- The last few months were fairly good ones for many in the textile business, but executives said there remains a bit of uncertainty about 1995 and how robust any growth will be.
Raw-materials costs are rising. Imports of textiles and apparel are still increasing. And, as always, there are the unpredictable shifts in fashion, which put a damper on the print business for most of 1994. Executives also said that the North American Free Trade Agreement and the newly ratified GATT will mean intensified global competition.
However, the industry's spirits are being heightened by several factors:
Continued strength in the two leading apparel fibers -- cotton and polyester -- despite the rising cost of both.
The popularity of novelty fabrics, both in knits and wovens, giving all fibers increased business. Denim continues to be one of the particularly hot markets (see separate story, page 22).
Signs of a pickup in the print market, which could call for increased rayon and polyester consumption.
Employment in the U.S. textile industry is on the rise. According to government figures, the industry in November gained a seasonally adjusted 3,000 jobs compared with October. Textile-industry employment was 674,000 in November compared with 671,000 a year ago. l In October, new orders for textiles surpassed textile shipments for the first time in this year. Shipments in October were $6.27 billion, while new orders hit $6.54 billion.
"These figures indicate the market is strengthening after a lull in summer business," said Dave Link, economist with the American Textile Manufacturers Institute. "The fact that unfilled orders also rose shows we're building a backlog for the future and that the industry is strengthening."
Man-made fiber producers said they expect to be sold through for at least the first half of 1995 domestically. Even the international markets, once considered problematic, are improving, they said. Among the natural fibers, cotton continues to gain market share.
The rising cost of wool, despite hampering some mills, is helping growers in Australia, who last year at this time, were complaining they weren't making enough money to sustain themselves and threatening to leave the business, which would eventually affect supplies.Mills and converters are also predicting business will improve in 1995, although much depends on how retailing fares, both during the current holiday season and early into next year.
Here's the outlook for some key industry segments.
The fiber industry, particularly in polyester and nylon, has been the hardest hit by price increases in raw materials. Polyester's key ingredients -- parazylene, terephthalic acid and glycol -- have all had increases in the 30 percent range.
Due to those rising costs, the three chief domestic producers -- DuPont, Hoechst Celanese and Wellman -- have each raised polyester prices twice since May. In the past 11 months, polyester staple has risen from about 68 cents per pound to 85 cents per pound.
"The major concern is what raw materials are doing to us and what we are doing to our customers," said Jim Casey, president of the fibers division of Wellman Inc. "There's no question in my mind that we are in an inflationary runup with respect to raw materials increases."
The good news, however, is that the price increases on fibers, thus far, have stuck. "Right now, all indications are that we are looking at a fairly robust business climate," Casey said. "I've been through many periods where it's been just as challenging as it is now. However, the competitiveness and the number of global complexities make it more challenging to manage a business."
Jerald A. Blumberg, DuPont's senior vice president who oversees DuPont's $6.2 billion fibers business, said that while the company continues to cope with rising costs, customers are seeing the firm's Dacron polyester as "a viable product," even with higher prices.
Blumberg said DuPont, which is coming off its two most successful quarters in fibers in five years, "is more focused."
"We are really looking forward to next year. We'll continue to be very aggressive in all fiber areas," Blumberg said.
Donald Lehman, president of Hoechst Celanese's fibers division, added, "I believe consumers are truly embracing polyester, especially in growing areas such as sportswear, activewear and ready-to-wear. I'm predicting a 5 percent increase in our business in 1995."Still," he added, "raw materials prices are going to have to be closely monitored."
Another round of price increases hit the market on Monday, when DuPont said it is raising prices on commodity polyester by 5 to 8 percent, effective with shipments of Jan. 1.
Also on Monday, North American Rayon Corp. and sister company North American Polyester Corp. both said price increases are on the way.
NAR said it will have a 5 percent across-the-board price increase covering all rayon products manufactured, effective Jan. 30.
North American Polyester announced it will increase prices 11 percent, effective Jan. 1. As for nylon, price hikes for that fiber's key ingredients -- adipic acid, caprolactam, butadiene and cyclohexane -- are increasing, in some cases up to 40 percent.
Last week, the three top domestic nylon markers said they were raising prices on nylon. BASF started the ball rolling, announcing it is raising its prices on commodity and specialty yarns for textile nylon knit applications by 3 to 7 percent, effective with shipments of Jan. 2, 1995. On Friday, both AlliedSignal and DuPont also hiked prices -- Allied, with increases of 3 to 5 percent for nylon fiber for the warp-knit market, and DuPont, with hikes of 7 to 8 percent for selected yarns sold to the warp-knit industry.
Bill Scott, BASF's sales and marketing manager for nylon textile products, said at the time that the price hike was implemented due to increases in costs of labor, energy and raw materials, and "so the company can improve profit margins for reinvestment in the business."
"What you have to remember is that for years, those materials were being sold at a very low [price] level," DuPont's Blumberg said. "The increases are correcting a global recession that was going on the past few years."
Another fiber category faced with rising costs is rayon.
As reported, the two leading U.S. domestic rayon makers, Courtaulds (200 million pounds annually) and Lenzing Fibers Corp. (130 million), both are raising prices on rayon staple between 5 and 10 percent, effective Jan. 2. According to industry executives, the current price for the most commonly used grade of rayon is between $1 and $1.05 per pound."Next year doesn't look too bad," said Dick Doidge-Harrison, president of rayon for Courtaulds. "The volume demand isn't bad, and inventories are on the low side. However, prices for wood pulp and caustic soda -- two key ingredients in rayon -- are sky-high.
"We decreased our employment by about 130 this year while maintaining the same amount of productivity," Doidge-Harrison added, "and we will probably have to raise prices again sometime during 1995. Rayon is still in the position of being a fashion fiber, and that works in our favor. Moving forward, the rayon knit business will offer a tremendous opportunity."
Doug Noble, vice president of marketing and sales for Lenzing Fibers Corp., said, "For the U.S. market, we think the import situation will improve because markets in Europe and the Pacific Rim are getting better, and that means less rayon coming here.
"We've reached the point that for the first time in history, U.S. rayon market prices are comparable to world prices," Noble added, noting that the company is thinking about implementing another price increase sometime in 1995. "However, we are not pocketing any of the increases. They are going straight to our suppliers."
Another fiber, acrylic is also carrying price increases into the new year, along with hopes for a more expansive market, according to executives from the top two domestic suppliers, Monsanto and Cytec Industries.
Gary Petersen, Monsanto's acrylic marketing manager, said the company is working closely with retailers for its DuraSpun and SnoBrite products and anticipates significant gains for both next year. The company also has announced price increases of 7 to 9 percent on certain types of its acrylic fibers, effective Jan. 1.
"We think we'll continue to make major inroads next year with MicroSupreme," said David Lyttle, director of market development for Cytec, discussing the company's acrylic microfiber. "Our big drives will continue to be in socks, women's sportswear and knit outerwear."
Cytec also has announced price increases on its acrylic fibers of 2 to 3 percent, effective Jan. 1.
In spandex, the news for 1995, rather than price, is the race for the number-two slot behind DuPont's Lycra. By the middle of 1995, Globe Manufacturing and Miles Inc. will be making nearly 11 million pounds of new spandex between them, aiming that production at markets previously controlled by DuPont, including hosiery, intimate apparel, swimwear and activewear.Miles's production is coming from a 7 million pound plant at Bushy Park, S.C., while Globe's 4 million pounds is at its new Tuscaloosa, Ala., plant.
"Looking at the arithmetic, 11 to 15 percent of the overall market in the U.S. is all we could ever hope to get," said James Heslep 3rd, Miles's director of Dorlastan marketing. Dorlastan is Miles's trade name for its spandex.
The Naturals: Cotton and Wool
For cotton, the big story continues to be the roller-coaster ride for prices. In mid-May, the price was nearly 83 cents a pound. Then, in late September/early October, the price fell to 67 cents a pound. However, as late as Dec. 1, cotton was back up, hovering at about 80 cents per pound.
While this year's tremendous cotton crop of 19.2 million bales -- the largest U.S. output ever -- could help prices, it's the Chinese cotton output that could be the main factor in determining cotton prices. One bale is 480 pounds.
Forecasts for China's harvest, which ended last week, indicate that the harvest could fall short of the 19.5 million bales originally estimated, and according to the latest reports, the crop could even be smaller than last year's 17.2 million bales.
Executives said the situation is simple: If China needs to import significant amounts of cotton, the price of the fiber domestically will rise. But even though prices will probably continue to fluctuate, cotton's demand is still on the rise.
According to figures from NPD, a Port Washington, N.Y., research company, cotton currently commands a 57 percent share of the market at retail on a fabric-weight basis. For women's apparel, the figure has been a steady 43 percent for the past two years, but the figure can swell, according to J. Nicholas Hahn, president and chief executive officer of Cotton Incorporated, the research and promotion arm of 30,000 U.S. cotton growers.
"Underlying all of the crop, market, weather news, etc., the cotton market is still a demand-driven one," said Hahn. "We don't see anything in the tea leaves that would mitigate against cotton continuing to increase its market share across the board, particularly in women's wear."Hahn cited blouses, dresses and sportswear as key women's categories, in which cotton is beginning to make substantial strides. As for wool, the turnaround, particularly from the grower's perspective, has been dramatic. Australian wool, from Nov. 25, 1993, to Nov. 25, 1994, has jumped from $1.53 per pound to $2.73 per pound.
And while he's not about to predict double-digit growth for the wool market in 1995, Danny Neff, director, Americas for the Wool Bureau, the North American arm of the International Wool Secretariat, said, "U.S. mills are gaining a lot of ground in wool products, coming up with new finishes and blends and moving into lighter-weight fabrics."
The IWS is also reducing the amount it planned to charge for the use of its Woolmark and Woolblend marks, for those licensees with sales of less than $5 million. Earlier this year, the IWS said it would be charging $5,000 a year for its licensees to use the marks. The charge takes effect May 1, 1995. For the smaller firms, the fee has been cut to $2,000.
"We have made this decision globally, after an extensive consultation with wool textile trade organizations in many countries," said Mac Drysdale, chairman of the IWS. "Many of the licensees who make an important contribution, in terms of innovation and quality, operate on a smaller scale."
Many of the organization's licensees, particularly coat manufacturers, smaller manufacturers and key suppliers, are still less than thrilled with the charge overall.
"We'll pay the fee this time around," said Arthur Spiro, chairman of Carleton Woolen Mills. "But we are looking at it with a jaundiced eye. I'm inclined to think they might waste the money as far as products are concerned."
As for the overall wool fabric industry, business looks to improve after a tough 1994.
"One of our objectives for the apparel divisions is to continue to diversify the product mix," said Christopher L. Schaller, president and chief executive officer of Forstmann & Co., whose firm, due to a combination of higher wool prices, higher interest rates and sluggish sales of women's outerwear fabric, said it will produce a fourth-quarter loss. Sales for the year are expected to be up slightly over the $233 million in 1993, with operating income declining to the range of $22 million to $24 million against $26.6 million a year earlier."We know that we'll have to work very hard to provide our customers with collections that provide value as well as fashion," said Schaller. "Raw materials now account for about 50 percent of the cost of our goods sold," said Carleton's Spiro. "They are up about 20 percent from where they were a year ago. We've attempted to raise prices, and obviously, there has been some resistance.
Mills and Converters
On the mill front, executives said the increase in demand for novelty knits, including better fleece, and the fact that many mills continue to invest in productivity and efficiency, bode well.
George Henderson 3rd, president and chief executive officer of Burlington Industries, said, "On balance, I'm optimistic, but it will still be a challenge in the apparel business. People are continuing to be more selective in the clothes they buy, and our challenge is to remain fashion-right, through all of our divisions."
Frederick Dent Jr., president of Mayfair Mills, said that because of what he sees as increased global competition, his firm has invested nearly $16 million in each of the last two years to modernize equipment at Mayfair's six plants. Dent also said the investments will enable Mayfair to absorb rising raw materials costs by being more productive and efficient.
"There are going to be two parts of success, one the top line and one the bottom line," said Arthur Wiener, chairman and chief executive officer of Galey & Lord. "Our top line is showing significant growth for the next four to five years. The bottom line, however, is different.
"We are in an inflationary spiral, and we don't see it changing in the short term," Wiener added. "Prices continue to rise, and we have passed some on. But it's also the day-in, day-out business expenses we have to pay. Everything from paper clips to coffee cups is going up."
Wiener went on to say that "nine months ago, we condensed our five-year capital expenditure plan to three years, all of it targeted to productivity gains."
Howard Ackerman, general manager, apparel, for Malden Mills Industries, the leading fleece manufacturer, said the company's fleece business, a strength in 1994, should continue in 1995."There is a continued emphasis on lighter-weight fleece, along with fleece made from recycled polyester," Ackerman said.
As for the converters, they said they expect the print market -- which is showing signs of improvement -- to continue that way through at least the first half.
Converters such as Omega Fabrics, Tandler Textile, Metro Fabrics and JBJ all said they are banking on strong demand for prints to help increase business. "Our business right now is as strong as it's been in some time," said David Caplan, president and chief executive officer of Metro. "August, September and October were slow, but I think the whole category is in for a good run."
"We are seeing a tremendous pickup, especially in California, and that should continue," said Ron Loeser, one of Omega's three partners. "As long as the prints are novel, they will sell well."
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