Overview

The outlook for the textile market for 2011 is positive according to most industry analysts, who cite production slowdowns and a resulting lack of supply as the cause for continued elevated pricing. According to the Federal Reserve, although the U.S. experienced increases in overall industrial production over the last three months of 2010, industrial production in the textiles sector has fallen each month since August 2010, dropping 3.6 percentage points over that period. Despite the low production levels during the recent quarter, textile production was still up 3.1 percentage points year-over-year as of December 2010 due to particularly active mills during the second and third quarters of 2010.

Although less-optimistic analysts note that decreased export demand has led to the production slowdowns, more optimistic market insiders assert that declining export demand is a result of the continued level of elevated pricing, as producers are resistant to discounting their remaining short supply.

The primary beneficiary of low supply levels has been cotton, but we have seen similar gains in market pricing for synthetic fibers, as more downstream producers opt for relatively cheaper alternatives. Production of apparel has followed an inverse pattern to that of textiles, as historical factors such as increased production before the holiday season, as well as more stabilized textile prices have worked to increase capacity utilization from 75.4% in July 2010 to 81.6% in December. Despite higher domestic production rates, apparel price indexes from industry sources have remained relatively flat over the past two years, in contrast to input costs that have risen significantly. The main culprit for pricing pressures has been importation of apparel, particularly from China. According to Textile-World, textile and apparel imports from China in 2010 ran approximately 30% above 2009 levels. A bill that has yet to be passed by the U.S. Senate calls for the establishment of tariffs on any nation undervaluing its currency. However, critics of the bill say that, although the bill would allow tariffs, the imposition of punitive tariffs would not be required by law.

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Originally Published in New Cloth Market, April-2011