By  on June 7, 1994

NEW YORK -- With the dramatic increases in prices of raw cotton over the last year, man-made fiber producers are mobilizing for what they see as an opportunity to build market share. But they'll have to act quickly.

Starting in March 1993, prices for raw cotton began a rapid rise and last week zoomed past 82 cents per pound, a level that hasn't been seen in five years.

Manufacturers of polyester, rayon and acrylic -- cotton's three chief man-made-fiber competitors -- say that the price situation, along with product and technological advancements in their individual industries, could help them eat into cotton's 57 percent retail market share on a fabric-weight basis. That 1993 figure is based on consumer data garnered by National Purchase Diary, Port Washington, N.Y., a consumer research group.

At the end of 1993, according to industry executives, polyester's share of the market was 25 percent; rayon, 3 percent, and acrylic, about 5 percent.

Still, they also know the window of opportunity might only be open briefly. A larger cotton crop that's been predicted for next season could drive cotton prices back down. According to the National Cotton Council, next year's crop could rise to 17.7 million bales from the current 16.2 million bales. As reported, world cotton production last year fell to 76.7 million bales from 82.8 million bales in 1992, primarily due to insect infestation, disease and weather problems in three key cotton producing regions: China, India and Pakistan.

"If we should get even more increased acreage, you could start seeing some falloff in prices," said Jess Barr, an economist with the Council. Executives at manufacturers of man-made fibers also note that sales of cotton products have been bolstered substantially by the efforts of Cotton Incorporated, the research, advertising and promotional arm of U.S. cotton growers. Of Cotton Inc.'s 1993 budget of $45.1 million, nearly $22 million was earmarked for advertising and promotion.

"There's no question -- when there is a change in prices, either up or down, there are decisions to be made by mills," said Ira Livingston, Cotton Inc.'s vice president of U.S. marketing. "However, there is no correlation in price changes in raw cotton and cotton market share. Prices have gone from the low-60-cent range all the way into the 90-cent range without having an effect."Historically, when man-made fibers manufacturers did an effective job, their fibers cost five times as much as cotton, and they were able to move market share," Livingston added. "The bottom line, however, is that decisions can be made in terms of percentage levels in blends and the consumer could still choose cotton. Ultimately, they are the final arbiters."

At the mill level, reaction to the rising cotton costs is mixed. Some said business hasn't been affected at all, while others said they are moving toward blends using more man-made fibers.

"Our cotton business is terrific right now," said Alfred Greenblatt, president of the apparel, home fashions and automotive business unit of Guilford Mills. "We are not using any less cotton right now. We've gotten the increases, and are passing them along. There's been no marked difference from our perspective."

Martin Tandler, president of Tandler Textiles, a converter here, said, "We're using about the same amount of cotton we always have, which is a lot. Some of our products have gone up substantially in price. I think, however, the cotton prices may have plateaued."

Still, there are those that are seeing the impact of higher cotton prices.

"People are shocked by price increases in cotton and are going for heavier blends of cotton and rayon and cotton and polyester, for instance moving from a 60/40 blend [of man-made fiber/cotton] to a 75/25 blend," said David Caplan, chief executive officer of Metro Fabrics here. "I think that's going to last as long as cotton prices are so high."

Caplan said that where Metro was paying $1.40 a yard for an 8.8 ounce polyester and cotton interlock jersey about a month ago, "those same goods now are going for about $1.70 -- that's a big jump."

Isaac Kier, chairman and chief executive officer of Lida Inc., a vertically integrated converter, said his firm also is using a higher man-made fiber content in knitted print cloth, moving from a 50/50 cotton/polyester blend to 55/45 and even 60/40.

"This is all being generated in terms of cost," Kier said.Here's how each of the three man-made markets view the current battlefield.

POLYESTER

Polyester, executives said, has been helped by a rise in demand for staple fiber, new capacity coming on stream and the fact that China has begun to buy large amounts of polyester from the Far East, cutting into the amount of imported products.

Executives also said some performance deficiencies in 100 percent cotton wrinkle-resistant fabrics, along with the quick rise in popularity of recycled polyester fabrics, will help polyester gain in 1994.

And, although the three primary U.S. polyester producers -- DuPont, Hoechst Celanese and Wellman -- have increased prices 7 percent as of May 1, they remain sold up through the year. Executives said mills are shifting blend levels to heavier concentrations of polyester.

The current North American polyester staple business is estimated at 3 billion to 3.5 billion pounds, with the worldwide staple market about 11.5 billion pounds. Even a small change in a blend level creates a huge demand for polyester staple and means millions of dollars for polyester producers.

Jerald A. Blumberg, a DuPont senior vice president who oversees the company's fibers business, noted, "We are starting to see more shifting in blends to more polyester, most of which is in response to what's happening with cotton."

"Today, with the tight situation that exists in cotton, polyester's market share has gone up," said Grover Smith, Hoechst Celanese's director of apparel and home fashion staple. "Whether this will continue, however, may be a little too early to tell. In the short term, though, polyester staple is capturing some market share from cotton.

Smith said the company's polyester business, because of the cotton situation, could grow about 5 percent in 1994, compared with earlier estimates of 2 to 3 percent.

"While we felt that polyester staple was in a good position to grow, we may be a little more further along than we thought," Smith said.

Jim Casey, president of the fibers division of Wellman Inc., also indicated that some 100 percent cotton wrinkle-resistant fabrics have not lived up to initial billing, and that could help polyester."Some pretty strong claims have been made about 100 percent cotton wrinkle-free fabrics, and it seems that the product hasn't quite lived up to these claims," Casey said. "The thing about polyester and cotton blends is that polyester always keeps its promise. Fortrel polyester can meet all the demands of wrinkle-free fabrics. It's the original wrinkle-free product."

Cotton Inc.'s Livingston countered, "There have been differences in the description of the product and the trade expectations of it. We have all along called it wrinkle-resistant and not wrinkle-free. There are some outstanding products out there that will meet the consumers' demands for what they are intended to be, wrinkle-resistant.

"It's a new concept that we are working to improve on," Livingston said.

Wrinkle resistance is judged by the American Association of Textile Colorists and Chemists. Using a 1 through 5 rating, any garment achieving a 3 qualifies as wrinkle-resistant.

As for recycled polyester, which is made from plastic soda bottles, the product has made significant inroads. Its biggest surge has been in fleece activewear, a market where cotton, historically, has thrived.

"We are appealing here to a particular consumer," Casey said. "It's a real growth area for us, and it's certainly proved a bigger factor than we imagined."

RAYON

Like polyester, rayon manufacturers have been helped by the world shortage of cotton. The world demand for rayon, executives said, has also risen, and while the U.S. market is still relatively flat, it is likely that sales here will rise.

The two top domestic manufacturers of the fiber, Lenzing Fibers Corp. and Courtaulds, have made heavy investments: Lenzing, in adding capacity at its Lowland, Tenn., plant, and Courtaulds, in improving efficiencies and manufacturing standards at its Mobile, Ala., site. The two companies provide more than 90 percent of the rayon used in the U.S.

Lenzing is in the second phase of a $90 million upgrade of Lowland. When completed, it will increase capacity to 125 million pounds from the current 100 million pounds. Lenzing entered the U.S. market in August 1992, when it acquired BASF's rayon business."Rayon, which has already established a strong position in the fashion market, will benefit by increased cotton prices," said Harald Schneider, president and chief executive officer of Lenzing. "Since rayon has the same cellulosic characteristics as cotton, it is a natural replacement for cotton in women's sportswear. Rayon actually offers added value because, at similar prices, the consumer enjoys the comfort factor of cotton plus the more sophisticated drape of rayon."

These are elements Lenzing is promoting. Schneider also said traditional cotton users have long-term cotton commitments and have secured price positions and therefore wouldn't be affected until later in the year.

"However, smaller mills and those that do not have major cotton positions have the option of considering alternatives to cotton," Schneider said.

Like Lenzing, Courtaulds has invested heavily in rayon, injecting about $50 million into rebuilding a production line at Mobile. The upgrade, said Dick Doidge-Harrison, president of Courtaulds rayon business unit, includes new spinning lines and pulp-handling systems.

"The reasons behind our investment are to enable the U.S. textile industry to remain competitive in a volatile market," Harrison said. "The world rayon market is moving in the right direction, and the U.S. is bound to be positively impacted. And the cotton situation is helping that along.

"Still, a lot of what happens will depend on the fashion market, which is cyclical. The trick is to have more ups than downs."

ACRYLIC

The U.S. acrylic industry, driven primarily by Monsanto and Cytec Industries, continues to stress the performance characteristics of the fiber to in order to eat into cotton's share.

Despite being way behind in two key markets -- socks and sweaters -- suppliers say they are making headway.

"In several markets that have been traditionally acrylic, particularly in socks and sweaters, cotton has increased its market share at the expense of acrylic," said Gary Petersen, Monsanto's Acrilan marketing manager. Petersen said the growth was fueled by a general rise in consumer preference of natural fibers, further heightened by the marketing programs of Cotton Inc.

"In addition, the pricing of cotton had been advantageous from a competitive standpoint, and the growth of six- and eight-pack tube socks were greatly enhanced by cotton."Petersen, however, now is hopeful the work of the Acrylic Council -- the acrylic industry's version of Cotton Inc. but with a much smaller budget of $1 million a year -- will get that industry turned around.

Focusing on features such the durability of acrylic, moisture absorption and faster drying, Petersen said, "We are finally getting through that cotton doesn't make the best sock. All the tests we have conducted have proven that."

While acrylic still is more expensive than cotton, it can be more cost-effective for mills because it requires fewer processes in the handling stages, executives said.

Two of Monsanto's optically-brightened acrylics are aimed at the socks market: Duraspun, a long-staple fiber, and Sno-brite, a short-staple product. The two fibers achieve whiteness without the use of bleaching, a sometimes costly process.

In the sweater market, Petersen said, cotton filled a demand for lighter-weight sweaters. However, with the trend toward even lighter weight and less bulk, acrylic can gain, he said.

"We had been slow in taking up the comfort and esthetic advantage of acrylic," Petersen said, "and perhaps focusing too much on performance. In sweaters, the consumer wants to know if the product is going to be comfortable.

"There are a lot of challenges and opportunities in front of us," Petersen added. "The acrylic industry has very positive things to say in fashion and performance. Our marketing efforts have been modestly successful. We are trying to debunk the myth that it's more expensive to print on acrylic fabrics, and we are investing in new products. We don't want to be Pollyannish about it, though, because we have some work to do."

Cytec Industries is focusing on its MicroSupreme, an acrylic designed to offer soft hand, drapability, comfort and superior washability.

The fiber so far has made its biggest splash in a cruisewear collection from Jack Mulqueen. The fabric was developed by Cytec in conjunction with Glenoit Mills here.

"We think the acrylic business is on the threshold of something pretty good," said David Lyttle, Cytec's director of marketing. "Cotton's had a pretty good stranglehold on the market, but we think it's time we can take some share back."

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