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Oil Prices Hikes Transfer to Fiber Makers

NEW YORK — Get ready for the squeeze play.<br><br>At a time when a weak economy and low consumer confidence is keeping up deflationary pressure on retail apparel prices, rising oil prices are creating inflationary pressure at the base of the...

NEW YORK — Get ready for the squeeze play.

At a time when a weak economy and low consumer confidence is keeping up deflationary pressure on retail apparel prices, rising oil prices are creating inflationary pressure at the base of the supply chain.

Threat of war in the Mideast and other factors have driven oil prices up in recent weeks, and makers of synthetic fibers —?who rely heavily on petroleum derivatives for their raw materials — last week announced they’d be seeking another round of price hikes, this time for polyester staple.

Wellman Inc.’s Charlotte, N.C.-based fiber unit on Thursday said it would raise its prices by 11 to 14 percent, starting with April 6 shipments. That follows a 12 to 14 percent hike in March.

DAK Fibers LLC, also of Charlotte, said it would increase its prices by 6 cents per pound beginning April 1.

Meanwhile, Kosa late last month said it would hike its polyester filament prices by 5 to 10 cents per pound, also effective April 1. Kosa, also of Charlotte, raised its polyester staple prices by 10 to 12 percent last month.

DuPont and Solutia have also hiked synthetic-fiber prices in recent weeks.

Typically, fiber manufacturers tell their customers they intend to raise their prices by a certain amount and then begin a negotiation price that results in a lower actual price hike, if any. The textile mills and yarn makers that are their primary customers have little leverage to hike their selling prices, since retailers adamantly oppose any increase in selling prices.

Market sources had mixed opinions as to whether the fiber makers and fabric suppliers would succeed in raising their prices.

Consultant Mary O’Rourke, of New York’s Jassin-O’Rourke Group, said Asian fabric mills had recently passed along price increases and that she expected mills elsewhere in the world to follow suit.

“It’s a given with the U.S. mills that a price hike will be necessary, but the Asian mills are also now swinging over that way,” she said. “You can expect at least a 7 percent increase in fabric prices.”

Rick Darling, president of Li & Fung USA Ltd., the New York arm of the international sourcing powerhouse, said retail realities mean it will be impossible to pass along price hikes.

This story first appeared in the March 11, 2003 issue of WWD.  Subscribe Today.

“We are seeing continued deflation at the unit price level, and we don’t see that easing up,” he said. That will leave manufacturers to operate on tighter margins, he contended.