Fiber prices are falling because fewer people are buying.
In its latest monthly review, fiber and textile consultancy PCI Fibres said polyester raw material fiber demand is weaker in Asia so prices have eased in June, weak demand for nylon textile brought prices down and viscose prices have peaked.
The growing trend of making things in places other than China is fueling the prevalence of technology that can allow the production of textile and apparel products closer to home.
Adidas, for one, has started making clothes in its Germany home base again at its 4,600-square-foot tech-savvy Speedfactory with robotic assembly lines. For now, the athletic retailer will be creating shoe uppers and cutting waste at the facility, but Germany’s national soccer shirt could soon be Made in Germany, too.
“This approach will allow companies to compete better with their Chinese counterparts by reducing costs and thereby lessening the impact of the labor cost element on the sourcing decision,” according to the report. “Production of commodity textiles will probably remain in low-cost locations and still be used as a developed industry, whereas the combination of shorter pipelines, flexible batch production and chain of custody are all powerful arguments for a move ‘back to region,’ if the cost challenge can be managed.”
If this technology can be successful across a range of product types, PCI said it could “fundamentally change” the geographic structure of major sections of the fiber and textile manufacturing industry.
Here’s a look at what happened with fibers in June.
Prices for polyester have eased, according to PCI, and mostly because demand in Asia is on the downswing.
“The G20 Summit will impact fibers production; supply should suffice, but prices in EU talked up,” the report noted.
There was no Asian contract price settlement in June, which rattled some nerves and sent PTA prices up in the month. Spot deals rose to $835 mid month as oil prices rallied and ended the month at $815 per metric ton (mt).
When it comes to Asia polyester textile filament, PCI said, “Growth rates in the Chinese textile industry are lower than recent years making it look like a mature industry at last. Recent retail apparel sales have been buoyant at this transition from spring into summer.”
Nylon textile prices have dipped in China on weaker demand. What’s more, Taiwan exports are down, industrial filament in North America is running well and Europe textile filament prices are stable.
Prices in China fell as much as 500 RMB ($74.88)/mt in June.
“There are no luster products to stimulate nylon purchases, and few promotions for sportswear made of nylon, although nylon is considered to be more suitable for this application due to better durability, elasticity recovery, soft handle and anti-pilling,” the report noted. “Nylon filament average utilization is around 73 percent and the stock levels around 34 days. Some factories in Fujian province are running at over 90 percent of capacity, but many are only under 50 percent.
There is little room for nylon prices to fall further, according to PCI, because polymer and CPL—nylon’s two major raw materials—prices are firmer.
Viscose prices had been on an upswing, but weakening demand has quelled that surge. In June, the price of viscose slipped to $1.76/kg, VAT excluded, and with prices for dissolving wood pulp (DWP) rising, viscose fiber producers’ operating margins will be under pressure.
There have been some shakeups in the sector through June. Sateri, one of the largest viscose staple fiber producers, has reopened some of its lines that were down for maintenance in May.
As such, according to the report, “Operating rates have rebounded up to 95 percent, while stock levels are reported to have risen by one day to 13 days.”
Sateri also completed the purchase of Linz’s 70 percent stake in the fiber spinning company Linz (Nanjing), which has an annual capacity of 8 kilotons per year, and will help Sateri extend its viscose offering.
Cotton prices generally trended higher in June. The Cotlook A Index increased 9 percent in the month to $0.76 per pound. Cotton prices in India are up 15 percent and prices in Pakistan have been stable around $0.65-$0.66/lb.
But cotton supply is tight. Crops for the 2015/16 season are in but there’s a four to five month delay before the 2016/17 season crop becomes available. Supplements tend to come from the Southern hemisphere like Australia, Brazil and Central Africa, but according to PCI, these crops are nearly fully committed during the period. India may suffer the most as a result.
December estimates pegged India’s cotton crop coming in at 6.2 million metric tons, lower than the previous two seasons, and the crop came in at an even smaller 5.8 million metric tons.
‘There is a concern among the Indian spinning community that a lack of cotton to supply the needs of all the domestic industry through November 2016, should weather patterns continue to reduce output,” according to the report.
Things in China are on the more stable side, with sales from the country’s cotton reserve bridging short-term supply gaps thanks to a smaller harvest and low imports.
Cotton production in China fell from 6.5 million metric tons in the 2014/15 season to 4.9 million metric tons this season. China has 2 million metric tons of cotton reserve slated for sale, and 0.9 million metric tons has been sold so far.
“There are concerns that supplies may become tighter around October 2016, with the continuing preferential policy for the development of textiles and clothing in Xinjiang partly to blame,” according to the report. “Since the development of spinning mills in the region, there is less supply of cotton yarn from Xinjiang to the rest of China and thus China’s cotton yarn imports are down nearly -20 percent year-to-date May compared with 2015.”
A stronger Australian dollar meant higher prices for wool in U.S. dollar terms, which made some buyers (like China) more careful about their purchases. The benchmark Australian wool auction price, the Eastern Market Indicator, increased from 929 cents/kg to 974 cents/kg.
“In terms of prices of different wool microns, in Australian currency there were gains for middle micron wools (over 20 microns) indicative of lower volumes on offer, and losses for fine wools (19 micron and finer) for which offer continues to increase,” PCI noted.