By and  on December 26, 2006

The world's textile producers have seen a steady increase in fiber prices during 2006, primarily because of increased energy costs, a trend that is likely to continue in the new year.

Wool has experienced some of the biggest price gains among natural and synthetic fibers. The average price of a pound of wool reached $3 last week, after ending 2005 at $2.13 a pound, according to the Woolmark Co.

Stuart McCullough, a product commercialization manager with Australian Wool Innovation, attributed the rise to a combination of a prolonged Australian drought and an increase in demand.

"There's a drought down there that they're saying is the worst on record," said McCullough, who is based in New York. "It's very bad and given that our seasons are the opposite of here, they had a winter with very little rain and they've now gone into summer when it doesn't rain."

McCullough returned from a trip to Australia last week and said the situation was the worst he had seen. Typically, Australian sheep farmers don't need to purchase supplemental food for the animals until February or March. However, farmers have already found it necessary to begin buying feed.

"If they can't feed or water the sheep, they can either sell the sheep for meat or they have to shoot them," McCullough said.

The demand for wool has increased among retailers and consumers. Retailers have gravitated to wool as a way to better their margins, while consumers have been drawn to less disposable and higher-quality products, McCullough said. The rising popularity of cashmere in recent years has benefited wool, as well, he added, pointing out that the fibers are similar.

"We're seeing pressures from both the supply and demand side," McCullough said. "You only need one to see price go up....There's no doubt the price will be higher in 2007."

Cotton prices have been fairly stable in the past year, dipping slightly to 51.99 cents a pound from 53.49 cents a year ago. Cotton Inc.'s December Economic Letter noted that the U.S. Department of Agriculture's monthly report points to looser markets for cotton domestically and worldwide. In the U.S., with 90 percent of the crop harvested, production estimates are unchanged from last month at 21.3 million bales.The USDA said demand forecasts waned from November, as both mill-use projections and export forecasts declined. Domestic mill consumption for this marketing year is projected to slide from to 5.1 million bales from 5.2 million, in line with year-to-date estimates of annualized cotton usage from the Census Bureau.

With no change in supply and demand lower than last month, ending stocks climbed 5 percent, or 300,000 bales, from last month to 6.3 million, pushing the stocks-to-use ratio to 29.9 percent from 28 percent — the highest level in five years — a pattern normally associated with weakness in prices.

World demand is expected to expand from last month to a record 121 million bales, mainly because of a 300,000-bale increase in use in India. September Indian cotton yarn output climbed 14.5 percent in the 12-month period, well above the 6.1 percent annual growth the USDA had forecast. With Indian investment in new spindles expanding by double digits from last year, Indian use may expand further in the months to come.

Worldwide, gains in supply are expected to outpace demand, which would likely lead to price weakness, Cotton Inc. said. An early look at 2007-08 points to increased plantings of alternate crops in the U.S. at the expense of cotton acreage, suggesting lower production next year. With forecasts for high petroleum prices to continue into 2007, polyester prices should remain at elevated levels, supporting continued growth in global cotton demand, the report said. It concluded that "while current fundamentals imply little short-term opportunity for sustained price gains, tighter supplies and higher demand next year portend a return to stronger prices in 2007."

There have been fluctuations in the synthetic fiber business, as well.

Greg Vas Nunes, Hyosung's president for Europe and the Americas, which manufacturers Creora spandex, said there had been a reversal in the global balance between supply and demand in the second half of 2006.

"A significant shortage of supply occurred due to asset shutdowns, raw material shortages and product mix [denier] shifts," Vas Nunes said. "Coincident with this shortage, fiber prices rose in the global market by over 10 percent from September onward."

Production capacity has been added for 2007 and the supply of raw materials has increased, leading Vas Nunes to believe that spandex fiber prices will "return to a more stable position through the year."David Stone, president and chief executive officer of Solid Stone Fabrics in Martinsville, Va., develops and sources fabrics globally and saw some price increases at the fiber level over the summer.

"The indications are that early in the spring there could be cost increases that are being driven primarily by petroleum," Stone said.

The larger impact comes from rising energy prices and a corresponding increase in transportation costs, said Stone. Still, factoring in rising fiber and energy prices, Stone predicts overall prices will increase between 2 percent and 6 percent.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus