With the domestic economy slowly strengthening, yarn production is up globally, and Asia and North America are posting the greatest growth.
Global yarn production rose 13 percent in the second quarter compared to the first, the International Textile Manufacturers Federation (ITMF) said in its latest State of Trade Report, and Asian yarn output rose 14 percent in the period.
North American output was up 5.6% quarter-on-quarter, owing at least in part to greater instances of nearshoring production because of rising costs in China.
Global fabric production increased 9 percent in the second quarter over the previous one, with Asia reporting strong increases, also at 9 percent. Fabric production was up 3.3% in Europe and 2.6% in South America quarter-on-quarter, but year-on-year production in all the regions was down, and overall global fabric output dipped 2 percent.
Estimates for yarn production in the third quarter are “positive” for Asia and North America, the study noted, but for Europe they remain unchanged.
Now that the Trans-Pacific Partnership (TPP) is making its way to President Obama’s desk to be signed, however, global yarn production could see certain shifts.
The TPP trade deal has a yarn forward rule of origin, meaning goods must be made using U.S. or other TPP country yarns to qualify for benefits unless the yarns have made the Short Supply List of allowable inputs from non-TPP players—all of which could have specific implications for countries.
For now, TPP includes the U.S., Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam.
Countries like the U.S. and Japan have the capabilities to produce high-end yarns, but countries like Vietnam have up to now relied on sourcing lower quality inputs from China for use in apparel and textile products.
“The TPP Yarn Forward provision is obviously bad news for China’s textiles and apparel manufacturers,” Chris Devonshire Ellis, the founding partner of foreign direct investment practice Dezan Shira & Associates, wrote in an op-ed for China Briefing. “The Chinese yarn manufacturing industry is now effectively limited to China’s domestic market and those of the ASEAN agreement. China is also about to lose the entire Vietnamese market in addition to being effectively cut off from U.S. trade. While this sounds draconian, in actual fact the Chinese industry has been in decline for a number of years, losing much of its base to Bangladesh and, to some extent, India.”