After one of the most volatile years in fiber prices in 2011, stability returned to the market in 2012 and the outlook seems steady for 2013, but not without some concerns.
Cotton prices are at 68.4 cents a pound today compared with 86.4 cents a year ago, after exceeding $2 a pound in the spring of 2011 following a perfect storm of renewed demand. The recession eased and emerging markets increased usage just as natural disasters such as droughts in Texas and floods in Bangladesh and Pakistan lowered crop yields. This coincided with farmers opting for higher-profit crops to bring supply levels even lower.
Cotton Incorporated’s November economic snapshot noted that while New York futures and aggregate A Index prices were gradually moving lower, Chinese mill-delivered prices described by the China Cotton Index have been slowly rising. Relative to July’s average, the latest values for the CC Index are about 5 percent higher in dollar terms. Cotton Inc. said a likely reason is the government’s purchasing program aimed at keeping minimum guaranteed prices. Since September, more than 10 million bales of Chinese cotton have been bought, representing a significantly faster pace than the same period last year. RELATED STORY: Fiber Price Sheet: December 18, 2012 >>
“Given the purchasing program maintains high domestic prices relative to those in other countries, the competitiveness of Chinese spinning mills has been affected and China’s share of world consumption has declined,” Cotton Inc. said.
In this month’s report, the U.S. Department of Agriculture lowered its estimate for Chinese mill use another 500,000 bales. At its current level, Chinese consumption is put at 15.5 million bales, or about 30 percent lower than it was at its peak in 2007-08. The decrease in Chinese consumption lifted the Chinese stocks-to-use ratio to 104 percent. The USDA noted that any value over 100 percent implies that if Chinese consumption in 2013-14 remains at the same level as 2012-13, China will have enough cotton stored in stocks to meet all of its consumption needs, without having to harvest or import any cotton.
With world consumption lower and world production higher, global ending stocks increased 1.2 million bales to 80.3 million. Higher ending stocks and lower consumption lifted the world stocks-to-use to ratio to 75.5 percent from 74 percent, which is the highest estimate on record. While global ending stocks are forecast to set a new record, Cotton Inc. said it is important to consider where much of this cotton is located. At the end of the 2012-13 crop year, China is forecast to hold 46.3 percent of world stocks.
“This is relevant since the vast majority of Chinese stocks is held by the government and can be withheld from the market,” Cotton Inc. said. “Correspondingly, any decision by the Chinese government in relation to the future of the reserve program could be expected to have a major impact on cotton prices around the world. If China decides to sell from reserves and decrease imports, stocks would accumulate in exporting countries and exert downward pressure on prices from exporting countries, [and be reflected in] New York futures and the A Index. If China maintains current policy and continues to absorb cotton through its reserve program, Chinese and world prices could continue to be supported.”
Polyester prices, which are often impacted by cotton usage and price fluctuations as its main fiber competitor, have been stable, as well. Polyester staple prices are at 87 cents a pound today compared with 84 cents a year ago and 99.5 cents at their peak during the cotton crisis in the first half of 2011. Polyester filament is selling at 76 cents a pound compared with 73 cents in December 2011 and a high of 88 cents in April 2011. Analysts suggest that soft demand and lower petroleum prices should keep prices low or stable. A barrel of light, sweet crude oil is at $86.73 compared to $99.53 a year ago.
Roger Berrier, president and chief operating officer of Unifi Inc., a producer of multifilament polyester and nylon yarns based in Greensboro, N.C., said at an investor conference last month that in the last 18 months, “the raw material environment around polyester has been very volatile.” Berrier noted that one of the main ingredients in polyester, paraxylene, has worldwide utilization rates at an all-time high of 88 percent, which “creates a whole supply chain dynamic where this ingredient remains relatively high.” However, he said there is additional capacity expected to be coming online at the end of 2013-2014, “so we anticipate these utilization rates will go back down to…86 or 83 percent, adding, “We do see that will create some stability around the paraxylene component that goes into making polyester.”
Wool prices wound up the year at $5 a pound, the same as they were a year earlier, after peaking in June 2011 at $6.39 a pound. Stuart McCullough, chief executive officer of Australian Wool Innovation, said the outlook for wool prices is stable, with supply and demand in balance. McCullough said the first half of the year was particularly strong, with prices falling off somewhat in the second half.
“The rule of thumb is the Eastern Market Indicator, which, for the first time in two years, went below $10 a kilogram. Now prices are back above $10 a kilogram. We know the supply chain is rather empty in Australia, that is to say there is no excess supply.…Europe is still going through a recession and demand there is very weak. We are confident the U.S. will continue to see modest growth and there is a lot of wool in the stores. The buffer is China. We have an emergence of great affluence in China. We are seeing consumers go out and buy their first wool sweater or wool suit. We think the first quarter of 2013 will see prices slightly above where it’s been.”
Lenzing Inc., which produces cellulosic fibers such Tencel, Modal and viscose, said the average fiber selling price in the first nine months of 2012 was 2 euros, or $2.63, a kilogram, down from 2.25 euros, or $2.96, a kilogram in the prior-year period. Lenzing said the main cause for the price decline was underutilization of production plants operated by many cellulose fiber manufacturers in Asia, as well as the lower cotton price compared with the previous year.
Lenzing said underutilization of production capacities in the fiber industry and the downstream processing chain could continue, leading to further price pressures. However, in the light of its market position for its branded Tencel and Modal lines, Lenzing anticipated a record level of fiber shipment volumes for 2012 of about 800,000 tons.
Nylon filament yarn prices fell 11 percent to $3.96 a kilogram in the year ended Nov. 30 due to sluggish demand, which is expected to continue, according to industry reports.
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye
Did you know: @carlychaikin of "Mr. Robot" has been painting for about a decade? The actress, who plays Darlene on the show, is a self-taught artist who lists Salvador Dalí and Chuck Close as some of her idols. Chaikin told WWD that painting is a form of meditation for her — A much-needed one given the intensity of "Mr. Robot." See a piece Chaikin is working on at WWD.com (📷: @jilliansollazzo) #wwdeye