NEW YORK — For manufacturers and marketers of natural and synthetic fibers, one of the key challenges in 2004 will be how to manage their rising raw material costs at a time when deflationary pressures are continuing to squeeze margins throughout the apparel industry.

At most major fiber concerns, executives are working on ways of enhancing fibers’ performance, with the hope that new technologies will convince buyers — and ultimately consumers — that it’s worth paying a little more for added value.

At Invista, the fiber arm of the Wilmington, Del.-based DuPont, executives said they’re sticking by their strategy of developing new textile innovations.

Invista executives are also preparing for the pending acquisition of their company by petroleum giant Koch Industries Inc. As reported, last month DuPont agreed to sell Invista to Koch for $4.4 billion. Koch officials have indicated their plan is to merge Invista and the Wichita, Kan.-based company’s KoSa polyester unit, which would create a business with annual sales in excess of $9 billion. The deal is not expected to close before March.

(DuPont on Monday revealed other restructuring plans to streamline the company after the Invista sale. For more, see page 12.)

“For the first six months, expect us to bring about innovations from a product perspective with consumer value,” said Bill Ghitis, president of global apparel at Invista. “Nothing will change between Invista and KoSa until closing, which means we’ll be competing. Once closing is upon us, then that will change and we will, of course, be working together.”

One common concern among fiber executives is the increase in cost for both natural and synthetic fibers, the result of rising raw material prices. The current price of one bale of cotton, for example, is up at least 30 percent compared withlast year, according to Cotton Incorporated. The price of caprolactam, a raw material used to make nylon, has jumped more than 50 percent, according to Ghitis.

“From a cost side, we don’t see much relief for next year,” said Ghitis. “But I’m an optimist and I think the revenue side will be better, not so much in price but in volume. Events such as SARS and the Iraqi War will not be repeated next year. So I believe from a revenue perspective that we may have a better 2004 than 2003.”However, Ghitis said raw material prices for polyester and nylon have been hit the hardest and that he doesn’t expect prices to drop next year. Other executives voiced similar views, though they said prices have been stable.

According to data provided by the consulting firm DeWitt & Co., last month the average price of polyester filament in the U.S. stood at 55 cents a pound, down 15.4 percent from a year earlier. Polyester staple — used primarily as an insulative filling — was selling for 57 cents a pound, up 9.6 percent. According to the Labor Department, the synthetic-fibers producer price index in September stood at 106, down from 107 a year earlier.

Rising synthetic-fiber prices could mean higher expenses for textile and apparel manufacturers. However, most fiber makers said they are only passing along a small price increase while trying to absorb the rest or reduce costs in other ways.

Regarding cotton, a recent report released by investment bank J.P. Morgan said high cotton prices will have little ultimate effect on retailers, concluding that they would at most lead to a 2 to 3 percent rise in the average production cost of goods.

For Mark Messura, vice president of strategic planning at Cary, N.C.-based Cotton Inc., the main issue facing the cotton industry is that clothes are too inexpensive.

“If you look back at the history of retail prices for apparel in the U.S. during the last decade, retail prices for clothing have gone down,” said Messura. “Consumers are paying less but raw material prices for manufacturers are higher and they’re not able to pass that along to the consumer.”

This inevitably means some manufacturers are shrinking their margins to be able to offer inexpensive merchandise. If companies become less profitable due to price pressure, it’s not a healthy thing for the cotton and apparel manufacturing industry, Messura added.

According to Cotton Inc., the world production of cotton is at about 92 million bales while the world is on par to consume about 98 million bales this year.

“How much we have and how much we need is out of balance,” said Messura. “If cotton prices stay in the high [70 cents per pound] range, many farmers will respond to that and plant additional land, which means a bigger supply and prices will come down.”However, supplemental cotton plantings wouldn’t actually be harvested until next fall, which could benefit synthetic fiber manufacturers until prices in the cotton market subside.

At Greensboro, N.C.-based Unifi Inc., which makes polyester and nylon, there has been a recent increase in demand for polyester that company executives believe is largely due to price increases in cotton.

Kim Lewis, manager of brand and retail marketing at Unifi, said apparel vendors that might normally make 100 percent cotton T-shirts, for example, are now bringing costs down by blending cotton with a synthetic, such as polyester.

“Our raw material is basically petroleum, which went up in March and has stayed consistent,” said Lewis. “We’re not expecting another increase so some companies are now a little more synthetic- friendly.”

Besides pricing, Unifi is launching a new polyester yarn called Avada during the first quarter next year. The new yarn will feature a metallic look with a very soft hand focusing on the swim and intimate apparel markets. Lewis said that the fiber’s soft hand will also be gentler on knitting machinery than other metallic-fiber yarns.

At the Outdoor Retailer trade show coming in January, the Santa Rosa, Calif.-based outdoor apparel brand Marmot plans to introduce a line of ski apparel featuring Unifi’s Amy yarn, a polyester yarn with silver additives. Amy is an acronym for “anti-microbial yarn.”

Unifi created a joint venture earlier this year with polyester maker Tuntex in Thailand to create Unifi polyester in the Far East. Now the company is looking at a potential deal with Chinese nylon and polyester maker Kaiping to make product in mainland China.

“We’ve signed a letter of intent and depending on how our market stays, that could move more quickly,” said Lewis. “Wherever the action is going to be, we’ll have something there.”

Other fiber makers are planning new ventures, including some plans for new factories. South Korea’s Hyosung Corp. said in September that it plans to investing $210 million over the next several years to increase its manufacturing capacity, according to Dave Darwin, senior market manager for the company’s Charlotte, N.C.-based U.S. arm.The spandex maker said it plans to spend $140 million to build a spandex factory in Europe by the end of 2006. Hyosung’s other existing spandex plants are in Anyang and Kumi, South Korea. The company has annual sales of about $4 billion.

“We see continued growth for 2004 but I think everybody is concerned as 2004 gets here because of what happens in 2005 with the elimination of quotas,” said Darwin. “The challenge in polyester and nylon is that it hasn’t grown as fast as spandex. That means the efforts are going to have to be directed toward research and development, which we have underway in Korea with polymers and yarns.”

The nations of the World Trade Organization are to end quotas on textiles and apparel in 2005.

Several executives said research and development is extremely important for U.S. fiber makers. By creating technologically advanced fibers, such as anti-microbial and wicking fibers, domestic fiber companies find themselves with a product that they contend cannot be made for less overseas.

At the Fall River, Mass.-based U.S. arm of Radici Spandex Corp., vice president Bill Girrier said his firm does well with highly specialized products, such as heat-resistant spandex, a recent addition to the product line. Overall, business at Radici Spandex has seen a recent pickup that Girrier attributed to some foreign competitors running up against year-end quota embargoes. That pickup would likely fall off early next year, as new quota is available, he reasoned.

“There is still opportunity in niche markets so we make fibers that can’t be made in China,” said Sonny Walker, president of nylon producer Nylstar. “We’re not trying to compete with commodity business in Asia, but rather trying to bring in business outside the apparel business, such as the automotive industry. We’re growing our business in applications like filtration.”

Nylstar is a large nylon producer in Europe that entered the U.S. market with its nylon brand Meryl three years ago. Walker said he expects business to increase about 5 percent in 2004.

For Karen Johnson, who joined Nilit America Corp. as president in August, expanding into other niche markets allows the company to see continued growth.“We’re a niche manufacturer and we’re broadening our niches, so we’re seeing some growth where others may not be,” said Johnson. “We had been exclusively a hosiery producer and little by little we moved into seamless, circular knitting and now warp knitting.”

Another niche market some companies are targeting is the medical market.

Charlotte, N.C.-based Hologenix LLC, a joint venture between polyester company Wellman Inc. and Los Angeles-based Holofiber Enterprises, has targeted the medical community with its product Holofiber. It claims the fiber increases blood circulation in people that have vascular problems as well as those who do not.

The company recently held a press conference with Graham McClue — a neurophysiologist not affiliated with any medical university and currently employed solely by Wellman — who said Holofiber “helps speed recovery after exercise, boosts energy levels and improves overall circulation.”

Holofiber, which is about 50 to 60 percent more expensive than regular polyester, is also being targeted to the activewear community.

To access this article, click here to subscribe or to log in.

load comments
blog comments powered by Disqus