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’05 Goals: Ready for Sourcing’s Evolution

Major makers are preparing for a sea change in worldwide textile and garment sourcing, as WTO nations end the 30-year-old quota regime.

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NEW YORK — Next year will bring a sea change to worldwide textile and garment sourcing, as the 148 nations of the World Trade Organization drop the quotas that have regulated trade for more than three decades.

The biggest hurdle many executives faced this year was ensuring that their companies were well positioned for the new era. Getting ready has been a particular problem for many domestic textile companies that have had continued liquidity problems in recent years.

Fiber and yarn companies also faced intense margin pressures as the rising price of oil pushed up costs, while apparel makers continued to deal with price deflation. Most fiber companies said they’ve been able to push through some degree of price hikes, though not enough to offset their rising costs.

Below, six top executives review 2004 and look at the year ahead.

This story first appeared in the December 28, 2004 issue of WWD.  Subscribe Today.

Rick Darling, president, Li & Fung USA Ltd.

Accomplishment: “As a company, I would say the launching of our brand business is our most notable accomplishment, though it does not affect our financial position for 2004 and has only a little effect on 2005. It sets a portion of our business on a very new course.”

Disappointment: “We have felt for a year now that China was going to be an uncertain situation and would be under restraints to some degree.”

Goal: “To get the brands into the market and to begin marketing these brands as major consumer labels.”

John Heldrich, president and chief executive officer, Galey & Lord Inc.

Accomplishment: “Hands down, our biggest accomplishment is partnering with a new owner [Patriarch Partners]. That is allowing us to have a legitimate future. It’s like night and day. Instead of being immersed in survival and trying to figure out how to get to the next day, we’re now focused on how to thrive and where do we focus on solutions for our customers for their futures.”

Disappointment: “Any time you lose focus on what has brought success in the past, in this type of environment that we’re in, it will have impact quickly on results.”

Goal: “Our focus will be clearly on product and on position in the world. We will need to be in regions where our customers create product.”

Jim Chesnutt, president and ceo, National Spinning Co.

Accomplishment: “Our successful start-up in El Salvador has to be at the top of our list. The amount of yarn that we make and use down there is very, very small. But what we have done is given our yarn customers an alternative to the Far East, with the same quality, competitively priced, and we have taken time out of the supply chain. As a result, we’ve had a positive reaction from our customers, because many of our customers who were jobbers in New York had tried the China thing and didn’t particularly like it.”

Disappointment: “In the last quarter, we have seen a significant softening of our business. I don’t know if it’s the retailers being overstocked, if it’s a pipeline that was filled extremely early, if it’s things not selling at retail or if it’s that their back has been turned on domestic production for first-quarter goods next year. That’s my biggest disappointment.”

Goal: “These are just uncertain times. We need to see if the retailers are going to turn their backs on us or not. I don’t think they will, but certainly there are going to be categories that will make it extremely difficult.”

Bill Ghitis, president of global apparel, Invista

Accomplishment: “Hands down, the successful transition of Invista from DuPont to Koch ownership, with continued growth in investment, was our major accomplishment for this year.” In April, oil concern Koch Industries acquired Invista, formerly a division of DuPont, and combined the fiber firm with its KoSa polyester unit to form the world’s largest synthetic fiber producer, with annual sales of $8.4 billion.

Disappointment: “The dramatic escalation in raw material costs has been a difficult external impact for us and our customers. We had hoped these costs would subside as quickly as they had risen and we tried to absorb the costs. It was very disappointing that the additional costs continued and we were forced to pass these price increases on to our customers.”

The producer price index for synthetic fibers, which measures overall shifts in pricing, rose to a three-year high of 107.5 in October and remained at that level in November, according to the U.S. Bureau of Labor Statistics.

Goal: “Invista apparel has some significant product innovations to be launched in 2005. Our goal in launching these new products is to set new standards for product performance and value in ways that help our customers differentiate via our innovation and consumer brands.”

B.B. Sonny Walker, president, Nylstar U.S.

Accomplishment: “Nylstar was very successful in running our plant full and supplying high quality [microdenier nylon] yarns into selected markets. We’ve had a good year helping customers steer away from some of the more commodity, low-end business that is being impacted by Asian imports.” A joint venture between France’s Rhodia and Italy’s Snia, Nylstar produces nylon for multiple uses including activewear and hosiery.

Disappointment: “The disappointment is we’ve had this huge increase in raw material costs come along. Unfortunately, we’ve had to raise fiber prices, we had no choice and that puts even more pressure on the system because it’s very difficult for our customers to accept the price increase. We’ve seen close to a 40 percent increase in ingredients going into nylon. That big of an increase is impossible for the market to absorb.”

Goal: “To continue supporting our customers, primarily in niche markets that are outside the mainstream commodity market — continue our strategy of making things that are not made in China.”

Bill Girrier, vice president of marketing and sales, RadiciSpandex

Accomplishment: “We were recognized as Vanity Fair’s supplier of the year. The recognition that came with that throughout the industry was probably our biggest accomplishment. If you’re performing at that level for them, it’s a signal to all of the other customers out there. It’s really a benchmark, a milestone to be in that circle now that was always dominated by the big brands.”

Disappointment: “We were very disappointed that there was a slow and reluctant response to the things that we brought to market. We invested a lot of money, a lot of time, a lot of production [on products companies in the industry said were needed, such as heat-resistant spandex]. We’re doing it exactly as you said and here it is and how come no one’s getting excited about that? We’re seeing that change. People are really wising up to the fact that they have to be different.”

Goal: “In 2005, we have to certainly respond to the new global market reality, which is being influenced by Asia. In order to be responsive to that reality, we have to be recognized and actually be differentiated from our competitors as a Western Hemisphere local specialist. That’s not a normal attitude for a fiber maker to have. Local specialist sounds like mom and pop. We have to have the right scale and be recognized as nimble. That’s going to work for our customers. Being huge and low cost is not going to do anything because that business belongs in Asia.”

The Fiber Price Sheet

On the last Tuesday of each month, WWD publishes the current, month-ago and year-ago fiber prices. Prices listed reflect the cost of one pound of fiber.

Fiber Price on 12/27/04 Price on 11/29/04 Price on 12/22/03
Cotton 46.79 cents 48.29 cents 75.72 cents
Wool $2.56 $2.61 $2.61
Polyester staple 63 cents 63 cents 57 cents
Polyester filament 63 cents 63 cents 56 cents
Nov. Synthetic PPI 107.5 107.5 105.9
Crude Oil $44.18 $49.44 $33.02

* The current cotton price is the November average on fiber being delivered to Southeastern region mills, according to Agricultural Marketing Services/USDA. The wool price is based on the average price for the week ended Dec. 17 of 11 different thicknesses of fiber, ranging from 15 microns to 30 microns, according to The Woolmark Co. Information on polyester pricing is provided by the consulting firm DeWitt & Co. The synthetic-fiber producer index, or PPI, is compiled by the Bureau of Labor Statistics and reflects the overall change in all synthetic-fiber prices. It is not a price in dollars but a measurement of  how prices have changed since 1982, which had a PPI of 100. Oil prices reflect last week’s closing price on the New York Mercantile Exchange of future contracts for light, sweet crude oil to be delivered next month.


Editor’s Note: This month, WWD expanded the Fiber Price Sheet to include the
price of crude oil, a vital ingredient for synthetic fibers such as spandex and nylon.

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