Obal Dynamics Impacting Yarn Production And Consumption

Global Dynamics Impacting Yarn Production and Consumption

College of Textiles, North Carolina State University, Raleigh, NC, USA

Abstract

This paper will provide the overview of the factors likely to affect the competition in the global yarn market related to yarn production and consumption. This report examines research, trade literature and government statistical reports regarding the yarn production, exports and imports, movement of machinery, preferential trade agreements and yarn consumption. To conclude, the trends in yarn production and consumption in different regions will be identified. Additionally, this study will provide the factors that should be considered for the yarn industry to stay competitive in this globally dynamic yarn market.

Keywords: Yarn Production, Yarn Consumption, Global Dynamics, Competitiveness, Imports and Exports

Introduction

Since the global yarn market has become competitive, domestic consolidation and regional adjustments are anticipated (Dockery, 2005). It is possible, from historical data, to examine the different factors that affect yarn production and consumption.

In a quota-free world, it is anticipated that relatively low-priced imported textile products will reduce the demand for domestic yarn (Gazanfer, 2005). As for the changes currently taking place in textile industry, the elimination of quota resulted in a flooding of Chinese imports last year. This year, additional adjustments will be required to deal with new 2006-2008 Chinese quotas, a possible upward revaluation of the undervalued Chinese yuan and all the new producer distribution-retail channels that are being developed and refined (Reichard, 2006). Many strategies evolved to stay competitive in yarn market during the year 2006. James W. Chesnutt, CEO, National Spinning Co. Inc., New York City and Chairman, National Council of Textile Organizations (NCTO), Washington asserts that if U.S. textile industry is going to be successful, it must go through Congress. One of the most successful legislations passed by congress in recent years is to put 34 categories of textiles and apparel products from China under safeguards (Chesnutt, 2006).

Some of the United States spinners have provided an outlook for spinning industry in 2006 and beyond. They envision in short term, that the U.S. spinning industry will have the advantage to work with Central American vendors, especially with the passage of CAFTA-DR. However, the long-term outlook is tempered by uncertain business conditions and increasing imports (Dockery, 2006). As apparel production is moving to Central America, with the closing of US operations, spinning manufactures are moving in the same direction to become yarn suppliers and to gain a competitive advantage in speed-to-market strategy for US marketplace.

The key drivers determining the competitive advantage in producing textile and apparel items are many factors such as energy, interest rate, etc. According to Julian (2005), the key drivers are labor, capital/infrastructure, technology, and raw materials (Julian, 2005). Labor competitiveness is defined in terms of labor cost per unit of output or called unit labor cost (Culbertson & Hackett, 2005). Capital/ Infrastructure is the money available to build upon an existing base (Julian, 2005). Technology is the process of incorporating the best available expertise and equipment into the production. Raw materials are considered to be a key driver when there is a cost difference between competitors (Julian, 2005).

To understand global dynamics of yarn market we have to obtain a meaningful measurement for the consumption by consumers in each country, the import and export trade of yarn must be evaluated. Knowing where and what are being consumed by whom, allows yarn production and future growth to be more understandable and predictable (Julian, 2005). Therefore, this report will particular emphasize yarn production and consumption, and the factors likely to affect the competition in the global yarn market.

Historical

Regionalizing production networks in the textile and apparel industry

Several broad regional shifts have occurred in the global textile and apparel industry since the 1950's (see Figure 1). The relocation of production is mostly dominant in the apparel industry. Some researchers think that the internationalization of apparel manufacturing began earlier and has extended further than that of any other industry. Textile and apparel firms have relocated their labor-intensive manufacturing operations from high wage regions to low-cost production regions in industrializing nations. Since the 1960's, the industrializing countries of Asia and some countries of Latin America have achieved a healthy return from export-oriented production (Gereffi, 1999).

According to Bair and Gereffi (2002), the first migration of apparel production was from North America and Western Europe to Japan in the 1950's and 1960's. Since Japan turned its interest to more profitable products such as cars, stereos and computers, and the Japanese textile and clothing sector lost 400,000 workers (Catholic Agency For Overseas Development (CAFOD), 1998). As a result, the second supply shift of apparel production took place in the 1970's from Japan to the Asian Tigers - South Korea, Taiwan, Hong Kong and Singapore. The trend of relocation of production did not stop there, and in the 1990's the textile and apparel industry had been dominated by the final wave of exporters, which include Bangladesh, Sri Lanka, Pakistan and Vietnam (Dicken, 2003). While China was the principal beneficiary of the shift (in less than ten years from the late 1980's), China became the world's major producer and exporter of clothing (CAFOD, 1998). During the 1990's, the relocation in production moved towards the Americas, which was focused on the United States, Mexico and the Caribbean.

Since the late 1990's, East Asia has become an apparel production complex, and other major regions were consolidated to become regional apparel complexes, such as the Americas and Europe. The reason lies in the trade-off between labor costs on the one hand and the need for market proximity on the other. Because time-to-market and the need to response of short-cycle production are beginning to impact competition in retail, apparel and textile channels, three global regions are emerging: 1) the United States plus Mexico and the Caribbean Basin; 2) Japan plus East and South East Asia; and 3) Western Europe plus Eastern Europe and North Africa. Each of