The Fiber Year 2005-06
Excerpts from a recent textile survey published by Saurer AG
By Andreas Engelhardt, Saurer Management AG
T
he global amount of yarns produced in 2005 accounted for 56.6 million tonnes,
representing a 3.6-percent increase over 2004.
Spun yarn dominated the world market with a 64-percent share. The long-term average annual
growth rate accounted for 1.9 percent. Within this segment, short staple spun yarns take in the
majority with 31.5 million tonnes. The output of filament yarns modestly increased by 1.3 percent
to 20.4 million tonnes, their long-term average annual growth rate amounted to 5.0 percent.
Three spinning technologies — ring (conventional and compact), rotor and air-jet spinning —
cover with their different focus on applications the entire range concerning fineness and input
material. The most important raw material on rotor spinning machine still has been cotton with a
share of 60 percent. The majority of all machines running, about 80 percent on the world scale,
produce yarns in the spectrum from Ne 5 to Ne 30. The majority in ring spun yarn covers the range
from Ne 18 to Ne 30.
China
China’s textile sales reached US$408
billion and apparel exports achieved US$117.5 billion in 2005. The local demand for cotton reached
9.4 million tonnes in 2005, causing a shortfall of 3.95 million tonnes. Most of the imports were
from the United States, Central Asia and West Africa. The dependency on wool imports also remained,
more than 100,000 tonnes were supplied from abroad.
Spun yarn output in China in 2005 is estimated at 13.9 million tonnes, representing a
7.3-percent rise over the upward revised output volume of 12.9 million tonnes in 2004. The rapid
growth of yarn output was fueled by the development of investments along the textile chain.
Nevertheless, the growth of yarn output will slow down after reintroducing quotas in textile trade
with the European Union and the United States.
Spinning capacity was on the constant increase in 2005 and new capacity was mainly in the
central and western part of the country. New installations of cotton spindles in Shandong exceeded
5 million in 2005. Furthermore, yarn manufacturers began to develop medium and high-end yarns. The
output of yarns 80s and above doubled compared to 2003. Yarns with high density and also compact
spinning developed rapidly. More than 500,000 spindles for compact spinning were put into operation
last year. The first phase of a 1 million-spindle compact spinning line of Shandong Ruyi Group
started in the fourth quarter of 2005 in Chongqing. A 3 million-spindle compact spinning project of
Shandong DY Yarn Factory is under construction in the Jining High-Tech Zone.
The textile industry occupies an irreplaceable position in China’s economy and plays an
essential role in balancing international trade, offering jobs and supporting the development of a
rural economy. Last year, the textile industry offered employment to 19.6 million workers and at
the same time, there were nearly 100 million farmers who supplied raw materials to the textile
industry. However, there are some challenges ahead to ensure long-term sustainable development of
the Chinese textile industry:
• Establishing a modern innovation system to expand research and development by joining the
efforts of different sectors — the lack of a sufficiently working system has led to weakness in
product designing, technical innovation and less competitiveness in the high-end market;
• Improving low profit margin — the average profit rate of the textile industry was only 3.5
percent in 2005;
• Cultivating brands of own intellectual property rights supporting a shift from
quantity-based expansion to quality- and profit-based growth; and
• Further improvements in the textile system to avoid overheated competition from excess
capacity and lessen the dependency on foreign raw material supplies.
India
India’s spun yarn production in 2005
grew 4.9 percent to 3.4 million tonnes. Cotton yarn has gained a further market share to 72.5
percent, output jumped up by 8.7 percent to 2.4 million tonnes. Blended yarns declined by 4.0
percent to 0.6 million tonnes, while 100-percent non-cotton yarns slowed down by 3.6 percent to
354,000 tonnes.
According to the Ministry of Textiles, the number of installed spindles slightly declined by
0.5 percent to 34.1 million spindles, open-end rotors increased by 1.5 percent to 391,425 at the
end of last year. In light of exceedingly strong investments, a significant number of outdated
ring-spinning machinery must have been replaced. This will clearly strengthen India’s position in
the race for market shares. The increased awareness of quality to meet the foreign sales market’s
requirements is also visible by more effort for integration. Manufacturers, already fully
integrated from yarn to the ready-made garment, tend to invest into the upstream raw cotton segment
to get full control. Benefiting from reimposed quotas on Chinese products, India was able to raise
textile and apparel shipments to the United States by 27 percent to US$4.6 billion. It is now the
third-largest supplier to the United States, taking in a 5.2-percent market share.
The international orientation continued, helping to gain economies of scale and proximity to
customers, as announced by Raymond Ltd. The Indian textile company and Belgian fabric maker UCO NV
are to set up a major global denim business with an annual production capacity of over 80 million
meters.
Bureaucracy, as well as tariff and nontariff barriers, have so far hampered the development
of the textile industry; i.e., the growing market is currently closed to international retailers.
Recently, a proposal was introduced saying that foreign investment of up to 51 percent should be
allowed in operations that produce and sell a single brand. However, India has become the second
sourcing option of choice after China. It has already the advantage in terms of raw material
availability in natural, as well as man-made fiber business. Furthermore, it has sufficient
spinning, weaving and garmenting capacity at its disposal.
Pakistan
Cotton is the backbone of Pakistan’s
economy. It accounts for 8.2 percent of the value added in agriculture and about 3.2 percent of the
gross domestic product (GDP); around two-thirds of the country’s export earnings are from the
cotton made-ups and textiles. Actual season’s cotton production is forecast to witness significant
declines in yield, down by 12.6 percent from 771 kilograms (kg) per hectare in 2004-05 to 674 kg
per hectare. In line with slightly less area for cultivation, the output is expected to drop by
13.7 percent to 2.1 million tonnes. Nevertheless, local consumption of cotton is believed to
increase by 9.3 percent to 2.6 million tonnes due to expansion and modernization of the textile
sector.
Pakistan’s textile exports have grown strongly in post-quota 2005, enjoying 14-percent
growth at US$2.9 billion to the United States. Total shipments increased for bed linen, cotton
fabrics and yarns. However, there have been falls in synthetic textiles and knitwear. As the
spinning and weaving industries have been investing heavily in new equipment and replacing old
equipment due to improved profitability over the last several years, difficulties for the knitwear
industry began to develop with the start of quota-free trade. This sector has already closed more
than 130 units, with about 50,000 workers losing their jobs.
To remain competitive and prevent manufacturers shifting capacity abroad, the industry may
embark on the strategy to improve quality and produce more value-added goods, rather than rely on
low-value yarn-based exports.
Vietnam
The economic growth accelerated in
Vietnam, accounting for 8.4 percent in 2005, only second to China in Asia. Growth rates in the
textile industry have even been stronger, although not all the ambitious government targets have
been achieved. Domestic cotton production has fallen short of the ambitious target of supplying
30,000 tonnes in 2005. Currently, domestic supply is below 10 percent of the country’s cotton
consumption. Vietnam still relies heavily on cotton imports, setting a new record of about 160,000
tonnes in the actual season. Vietnam’s mill consumption continues to increase to meet the strong
demand from the rapidly expanding textile industry.
Last year’s number of installed short-staple spindles has increased by 11 percent to 1.94
million, while open-end rotors just rose 2 percent to 22,000. Consequently, the output of ring
yarns went up by 15 percent to 222,300 tonnes. On the other hand, production of rotor and
long-staple yarns stagnated.
Crucial to the country’s development of the textile and apparel industry is the export
performance to the United States and the European Union. Vietnam, not yet being granted World Trade
Organization membership, was struggling to reach its targets. It benefited from a quota-free relief
for shipments into the United States from end-July onwards. This year’s textile export target
accounts for US$5.2 billion to 5.4 billion. Helpful might be that Vietnam and the United States
have extended a bilateral apparel agreement until the end of 2006, giving Vietnam quota preference
over China.
Finally, remarkable changes in the investment policy have been observed. Textile factories
have been moving from inside the city to new industry zones, initiating new investments to replace
machinery. Like in the past years, investments from the private sector have been stronger than
those from state-owned companies. Efforts to privatize state-run companies may further stimulate
the industry.
Turkey
Turkey’s textile and apparel sector
has long been one of the most important industries of the economy, accounting for 10 percent of the
country’s gross national product (GNP), 26 percent of total exports and representing 20 percent of
employment. This industry is facing fierce competition from China, India, Pakistan and Bangladesh
in export markets. Exports to the United States dropped already last year by 8.8 percent to US$1.6
billion, and they clearly suffered from the European Union’s removal of textile quotas in 2005 as
well. In 2005, exports were very far from the double-digit growth experienced in the previous
years.
To protect the domestic market from surging Chinese imports, the government has decided to
limit imports from China for 42 categories from woven cotton fabrics in category 2 to knit shirts
in category 4 and pants in category 6, effective from 14 January 2005. Imports may not increase
more than 7.5 percent over a one-year period (6 percent for wool products).
Nevertheless, production in the country’s 40,000-plus apparel and textile companies has
dramatically fallen. Another reason for this poor performance is partly relocation of capacities to
other countries, such as Central Asian countries, to cut manufacturing costs.
The current season’s cotton production is forecast to drop by 14.5 percent to 770,000
tonnes, hitting the lowest level in 10 years. As the great majority of Turkey’s cotton is
handpicked, high labor costs continue to be an obstacle. However, the Turkish textile industry is
in transition to adjust to the new conditions. While some companies are downsizing and focusing on
more value-added products, others are moving production units to countries where cost of production
is less than in Turkey. As a result, domestic cotton consumption is expected to decline in the
coming few years. This will have a negative impact on future investments; open-end spinning
technology may receive a larger relative portion in the future. The total spinning capacity is
estimated at about 1.9 million tonnes, of which 85 percent is for cotton and the remainder is for
synthetics. Today’s excess of capacity becomes apparent with a utilization rate of below 65
percent, producing about 1.2 million tonnes of spun yarns.
Uzbekistan
Uzbekistan is the world’s
fifth-largest producer of cotton and the world’s second-largest raw cotton exporter. Actual season’s
production has been lowered to 1.2 million tonnes due to slightly lower yields. Exports are
forecast 18-percent higher than the previous season as less cotton is used for domestic processing.
More than 80 percent of the cotton produced is being exported. Cotton is an essential commodity for
the country, contributing 15 percent to GDP and earning 25 percent of the foreign exchange
revenues.
According to a World Bank study (“Cotton Taxation in Uzbekistan. Opportunities for Reform,”
August 26, 2005), the cotton sector is overtaxed and oversubsidized. An unrestricted evolution of
the market forces and lifting prices towards world market levels would lead to an increased
production.
A considerable portion of the installed capacity of 1.4 million spindles and 0.3 million
open-end rotors still is industrial heritage from the former Soviet period. This will hamper a
cost-effective and high-end export production. As a consequence, the Uzbekistani textile industry
reduced cotton yarn output by 8.9 percent to 141,000 tonnes in 2005 and cotton fabric production
26.6 percent to 247.0 million square meters. This opens up huge potential for future investments to
upgrade and expand the domestic cotton yarn industry.
Installed Spinning Capacity
Asia accounts for 78 percent of the
world’s installed spindles. China is the undisputed leader followed by India, Pakistan and
Indonesia. Outside Asia, only Turkey and the European Union have a large number of spindles. In
terms of productivity, Pakistan has the highest at 230 kg of yarns per spindle, Indonesia is second
with 200 kg and China follows with 185 kg and India at 130 kg.
The development of installed spinning capacity for selected markets is shown in Tables 1 and
2.
July/August 2006
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