NEW YORK — Like many of the synthetic strands they sell, fiber companies report that their sector, which seemed stretched almost to the breaking point, is snapping back into shape.
This story first appeared in the July 9, 2002 issue of WWD. Subscribe Today.
They expect the resiliency to carry them through a stronger second half. Executives at major fiber firms based in the U.S. and international companies with American branches said they are seeing an uptick in business for the first time in many months. They said the difficult market conditions over the past year that forced many mills to downsize or go out of business acted as a siphon that filtered out weak companies and forced others to restructure.
Executives at the surviving companies said several strategies helped them stay afloat:
l Focusing on specialized segments of the market.
l Approaching companies with manufacturing capabilities in the Caribbean and playing up the benefits of the Caribbean Trade Basin Partnership Act.
l Pushing domestic mills to take advantage of the short lead times associated with buying domestic fibers.
l Creating innovative products that aren’t available from Far East mills.
While many said they feel the industry is still getting itself back on its feet, others acknowledged that the domestic textile industry will never again be the giant it once was. But overall, the feeling in the market is that the eye of the storm has passed and it’s now time to focus on increasing sales.
In reaction to last year’s recession, inventories throughout the apparel pipeline have dropped, causing fiber companies to slow production. Demand picked up early this year as retailers began rebuilding inventory, and that coupled with an increase in petrochemical prices — oil is the raw material for nylon, spandex and polyester — is making fiber prices jump. Some fiber executives said they’ve already hiked prices twice this year as the demand for fibers grows.
At Greensboro, N.C.-based Unifi Inc., makers of polyester and nylon, two raw material price increases, between 7 and 10 percent each, are forcing Unifi to raise prices, according to Unifi senior vice president Mike Delaney.
“We’re not in a position to eat that,” Delaney said of the increased costs. “So we’re analyzing what customers can handle it.”
On the flip side, Delaney also said raw material prices are rising even faster in Asia. Since Asian competitors often rely on lower prices as a competitive advantage, Delaney said that trend may help level the playing field.
RadiciSpandex Corp., a subsidiary of the Italian firm The Radici Group, is planning a price increase for the next six months, according to Bill Girrier, vice president of marketing and sales at the Fall River, Mass.-based company. Still, he acknowledged that any price hike must be made selectively, so as to not lose market share.
Ellen Flynn, vice president of marketing at Acordis Cellulosic Fibers Inc., which produces the Tencel brand of lyocell, said the demand for her product is getting difficult to meet since there is a shortage of cellulosic fibers on the market. She said demand is currently exceeding supply, and that a runup in the cost of wood pulp — a key lyocell raw material — makes a price increase a must. She said her firm’s factories in Mobile, Ala. and Grimsby, U.K. are trying to boost production.
“Obviously if we can pass on our raw material increases, we’d like to,” Flynn said, though she would not disclose any details about how large an increase the company is considering.
A raw material price hike has to be felt through the entire chain, according to Washington, N.C.-based National Spinning president and chief executive officer Jim Chesnutt.
“We don’t have any choice,” Chesnutt said. “The margins for everyone at every point in the fiber producer chain are so thin that the increased chemical costs make raising prices mandatory.”
Chesnutt said raw material prices have increased by 4 percent to 6 percent. However, Chesnutt added that his business is up between 3 percent and 5 percent. Business, he said, is OK.
“You’ll never get me to say strong because I don’t think it will ever be strong again in this country,” Chesnutt said. “China continues to do things to us to death. They don’t seem fair to me, but I don’t see Washington helping us.”
A spokesman for the New York office of Ilkley, U.K.-based The Woolmark Co. said that the price of wool increased by roughly 25 percent over the past year and more increases between 10 percent and 14 percent can be expected within the next six months. He said the increases are largely caused by uncertainty in the market, since the wool stockpile in Australia that made regulating the wool price easier was used up.
Meanwhile at DuPont Textiles and Interiors, global apparel president Bill Ghitis said sales in the Asian market are up about 50 percent while North America is down about 10 percent from year-ago levels. However, North American DTI sales were down only 5 percent last quarter, an improvement from the first quarter, Ghitis said, adding that he expects that improving trend to continue for the rest of the year, leading to overall flat North American numbers for the year.
To raise sales figures in the U.S., Ghitis said it’s important to focus on innovative fibers, rather than trying to compete with Asian producers in the commodities market.
“This is how we help the industry in the U.S. and Europe be competitive in the market, compared to cheap imports,” Ghitis said. “We’re trying to differentiate products to benefit a more sophisticated customer.”
In the next five years, Ghitis said, DuPont is looking to unveil 25 new products in the six following platforms: easy care; performance; protection and prevention; mobility; health and wellness, and aesthetics and feel.
Instead of creating a new fiber in a lab with hopes that a customer bites, Ghitis said DuPont will be more consumer-oriented, first identifying a consumer need and then figuring out how to fill it with a fiber. For instance, DTI could conduct market research to find what consumers are unhappy with in underwear and then use that data to create a product, he said. To further implement this plan and be more in touch with consumers, DuPont created five global marketing director positions to study consumer wants.
Ghitis also said he plans to grow the Teflon brand, since he said it carries high consumer recognition.
“So we’re going to extend Teflon to mean easy care,” Ghitis said. “Like a jeans with Teflon that’s stain repellent and wrinkle resistant.”
One area where DTI has tried to reach a niche consumer is through the denim market, where the company bought a minority share in Design Development Concepts Lab in May, as reported. The partnership allows DTI Apparel to create and test innovative products and gives DDC-Lab access to DTI’s research and development resources.
Like Ghitis, Radici’s Girrier also said he noticed an increase of demand in the Asian market. Girrier said he noticed the demand from Asia picked up about two months ago, which he said was uncharacteristic for that time of year. He noted the trends in the different markets around the world are becoming more in-sync with one another.
“What’s happened is that inventories are low and when markets pick up there will be a frantic demand for goods,” Girrier said. “As the tide goes out and the market goes dry, there’s going to be an influx of healthy payments and that type of thing.”
Going forward, Girrier said companies that want to survive have to be agile, so when the phone rings, a company can respond to the customer, even if that means accommodating smaller orders.
“If you get complacent,” Girrier said, “you won’t be in business for long.”
Focusing on economies around the world that are self-sufficient is a strategy for the next six months and into the future, Girrier said.
“I think as China grows and prosperity spreads, there will be the emergence of a middle class and it’s going to create its own consumer economy,” he said. “I think there is a need for local supply.”
Radici has recently introduced a couple of new fibers with distinctive properties. One of them is S45, a heat-resistant spandex, intended to make it easier to dye stretch polyester fabric. Polyester needs to be heated to 265 degrees Fahrenheit to be dyed in conventional processes, which was a problem for spandex blends, since that fiber melts at 225 degrees. The other is a black spandex, called E12, since 12 is the number for carbon on the periodic table of elements — as in carbon black.
At the end of 2001, John Hobson of Wellman Inc. said poor consumer sales and postponed deliveries resulted in his factories running at about 50 percent of capacity.
“We feel a lot better than, say, six months ago,” said Hobson, who is vice president out of the company’s Charlotte, N.C., offices. “Starting in mid-January we’ve seen a significant pickup in our fiber business. We’re wondering how long it takes to refill a pipeline or if it’s really a pickup in business,” Hobson said. “We’re now very close to running at 100 percent.”
Hobson said there is a focus on Caribbean countries going forward, especially as customers are manufacturing in El Salvador, Guatemala and Costa Rica.
“We think business is good. It’s definitely better than we expected it to be when we did our planning in the fourth quarter of 2001,” Hobson said. “We expect to move more pounds than we did last year.”
Hobson said Wellman’s volume is up about 3 percent since the second half of last year. Sensura, a fine-denier wicking fiber is set to expand into different garments, he said, especially into men’s and women’s pants, golf shirts and possibly home textiles. Sales for Sensura have tripled compared to the same period last year, Hobson added.
At Unifi, Delaney said business to the CBI region has doubled, now making up about 10 percent of Unifi’s export business. For the rest of the year, Delaney said Unifi will continue its effort to bring business back into the Western Hemisphere, which means continued campaigning for the Caribbean.
“I think CBI is a long-term development that has to come from everyone in the industry,” Delaney said. “Every time a program ships from Asia to the CBI, we all win.”
Hector Camberos, president of DAK Americas, which owns the former polyester staple operations of DuPont, said as percentage of imported garments continues to grow, he believes it’s important to take advantage of the technologies that are offered domestically. He added that DAK Americas will focus on technical fibers by creating different variations of Hidrotec, a wicking polyester used in activewear.
“If we continue to develop new products that the retailers will not be able to find in the Far East. Then they’ll be forced to buy them,” Camberos said. “We’re committed to the fibers industry and we have no plans to close any facilities. We’re just trying to look for different ways to grow our share of the business.”
At Tencel, sales are up over 30 percent compared to last year, according to Flynn. She said the company plans to focus on women’s wear in the future. Knits are another focus for the company going forward.
Flynn said prices out of Asia are more competitive and that there is more full-package garment production coming out of Asia to meet the demand from consumers.
Flynn also said Tencel will launch its new print ad campaign this month with a budget increased by 50 percent over last year, though she wouldn’t disclose the actual amount the company expects to spend.
Nilit America Corp., the American branch of the Israeli nylon producer, is also upping its marketing and advertising, by 20 percent, according to Mac Cheek, president.
But his biggest plan for the second half of the year, Cheek said, is to expand the business into other areas besides women’s sheer hosiery. This will include further expansion into seamless garments with different variations of its nylon brand Sensil such as Sensil Britex, Sensil Arafelle and Sensil Colorwise.
While the company’s factory is located in a small town near Nazareth, in northern Israel, Cheek said the company is looking to expand outside of that country. Cheek said it’s not related to Israel’s political problems, but due to trade barriers around the world from that location.
“My guess is that we would buy one that’s already running,” Cheek said. “That could be in the U.S., Brazil or Argentina. We have a team of people studying that right now.”