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Ten Reasons Why the Global Textile Industry Demands Quality Cotton

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Ten Reasons Why the Global Textile Industry Demands Quality Cotton BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD TheThe CompetitiveCompetitive Edge:Edge: TenTen ReasonsReasons WhyWhy TheThe GlobalGlobal TextileTextile IndustryIndustry DemandsDemands QualityQuality CottonCotton Robert P. Antoshak President Globecot, Inc. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Why Does Quality Cotton Matter? There are ten factors that impact today’s global textile industry and force mills to consider quality cotton … BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD 1. Textile Industry Consolidation 2. Continuing Overcapacity 3. Export Competition 4. Consolidation in Raw Materials 5. Shifting Investment Flows 6. Slowing Growth in Global Market 7. Consolidation of Retail Sector 8. Government Policy 9. The Impact of China 10.The Impact of China’s Competitors BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 1: TextileTextile IndustryIndustry ConsolidationConsolidation • Decline of U.S., E.U. industries • Significant reorientation of industries in Korea, Japan, Taiwan and Hong Kong • Shifting of investment resources away from U.S. and E.U. in favor of China, India, Vietnam, etc. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD GlobalGlobal ProductionProduction ofof CottonCotton YarnYarn 25000 20000 Asia/Oceania 15000 Europe 10000 Africa Americas 5000 1,000 Metric Tons 0 '80 '85 '90 '95 '00 '05 '06 Source: ICAC BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD GlobalGlobal ProductionProduction ofof CottonCotton FabricsFabrics 14000 12000 10000 Asia/Oceania 8000 Europe 6000 Africa Americas 4000 1,000 Metric Tons 2000 0 '80 '85 '90 '95 '00 '05 '06 Source: ICAC BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 2: ContinuingContinuing OvercapacityOvercapacity • Rush to build new investment in China has resulted in nagging overcapacity in some sub sectors • Government incentives in India have also contributed to inefficient overcapacity in sub sectors of textile industry BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD TooToo MuchMuch ofof aa GoodGood Thing?Thing? AsiaAsia DominatesDominates thethe GlobalGlobal TextileTextile MachineryMachinery BusinessBusiness 450 400 350 300 250 200 1,000 Looms 150 100 50 0 Africa North South Asia & Eastern Western Other Europe America America Oceania Europe Europe (Cumulative Weaving Machine Shipments 1990-1999) Source: ITMF BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 3: ExportExport CompetitionCompetition • Until overcapacity problems are rationalized throughout Asia, buyers of goods produced there will have a significant upper hand • Too easy for sourcing companies to play suppliers one off against each other BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD TopTop GlobalGlobal ExportersExporters ofof ApparelApparel Tunisia Romania Thailand Korea Indonesia Bangladesh U.S. Mexico Turkey E.U. (extra) Hong Kong China 0 1020304050 Billions of U.S. Dollars ($) (Exports in 2006) Source: UN BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 4: ConsolidationConsolidation inin RawRaw MaterialsMaterials • Limited number of growing regions for cotton in the world • Synthetic fiber production tends to move near the centers of textile production • Also suffers for overcapacity and government policies BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD MoreMore ThanThan HalfHalf ofof GlobalGlobal CottonCotton ProductionProduction isis inin China,China, USUS andand IndiaIndia Others 26% China 29% Turkey 4% Uzbekistan 4% Pakistan US 8% 17% India 12% Based on Millions of 480-lb Bales 2006/7 Projected Production Source: USDA BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD MoreMore thanthan ThreeThree--QuartersQuarters ofof PolyesterPolyester isis ProducedProduced inin AsiaAsia China 35% Jap/Tai/Kor 25% NAFTA/Amer. 4% E. Eur/Turk 4% Oth. Asia W. Eur. 19% 5% US 8% 2006 in Billion Pounds Source: FEB BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD AsianAsian MillsMills ConsumeConsume TwoTwo--ThirdsThirds ofof AllAll FiberFiber Western Europe 12% South America 6% North America 18% Asia 64% Billion Pounds, Cotton, Synthetics, Wool 2006 Source: FEB BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Result:Result: U.S.U.S. EvolvesEvolves intointo anan ExporterExporter ofof CottonCotton 25 20 15 Production Consumption 10 Exports 5 Million 480-lb Bales 0 1999- 2000- 2001- 2002- 2003- 2004- 00 01 02 03 04 05 BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Result:Result: ChinaChina EvolvesEvolves intointo anan ImporterImporter ofof CottonCotton 45 40 35 Production 30 Consumption 25 20 Million 480-lb Bales 15 1999- 2000- 2001- 2002- 2003- 2004- 00 01 02 03 04 05 BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 5: ShiftingShifting InvestmentInvestment FlowsFlows • Enormous influx of capital into Asian region • Influx has helped to build the economies of Asia, but has also contributed to overexpansion in some sub sectors of textile industry BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD FDIFDI inin TextileTextile IndustryIndustry SetsSets thethe StageStage forfor ChinaChina’’ss FutureFuture GrowthGrowth 40 35 30 25 20 Upgrading New Construction Billion Yuan 15 10 5 0 2002 2003 2004 2005 2006 2007 BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 6: SlowingSlowing GrowthGrowth inin GlobalGlobal MarketMarket • One word typifies global textile consumption in the 20th century: growth • However, another word typifies global textile consumption in the 21st century: moderation BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD WorldwideWorldwide TextileTextile ConsumptionConsumption HasHas SoaredSoared OverOver thethe Years,Years, butbut …… 2005 53609 1950 9939 1900 3893 1850 2200 1800 1600 1770 1400 0 10000 20000 30000 40000 50000 60000 Thousand Tons Source: ICAC, Wool Bureau, UN/FAO/Globecot Estimates BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD …… TheThe RateRate ofof GrowthGrowth hashas SlowedSlowed 4.5 4.0 3.5 3.0 2.5 2.0 % Growth 1.5 1.0 0.5 0.0 1770- 1800- 1850- 1900- 1950- 1950- 1960- 1970- 1980- 1990- 2000- 2010- 1800 1850 1900 1950 2000 1960 1970 1980 1990 2000 2010 2020 Consumption Per Capita Source: Globecot Calculations BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 7: ConsolidationConsolidation ofof RetailRetail SectorSector • Today, 20 retail firms make up 55% of the global market for apparel • “Big Box” stores have driven small retailers as well as many traditional department stores out of business • Result: Both top and bottom of retail business has been heavily consolidated into the hands of a few powerful buying organizations BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD LargestLargest ImportersImporters ofof ApparelApparel China Norway Singapore Australia Korea Switzerland Russia Canada Mexico Hong Kong Japan E.U. (extra) U.S. 0 10203040506070 Billions of U.S. Dollars ($) Source: UN (Imports in 2006) BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 8: GovernmentGovernment PolicyPolicy • WTO/ FTA Agreements • Farm Bill policy • Incentives to over produce • Quota restrictions result in shifts in global capacity and efficiencies • Have U.S./E.U. quotas on Chinese exports actually helped other countries such as Vietnam and Cambodia? BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD U.S.U.S. TariffTariff CutsCuts atat EndEnd ofof MFAMFA Man-Made Fibers Made-Ups Yarn 1989 2004 Fabric Apparel Total Textiles & Apparel 0 5 10 15 20 Average U.S. tariffs Source: OTEXA BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD U.S.U.S. ImportsImports ofof Apparel:Apparel: AverageAverage PricesPrices $2.50 $2.00 $1.50 $1.00 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 U.S. $/Square Meter Equivalent as an Average for all Source: OTEXA/U.S. Census Bureau Textile/Apparel Imports BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 9: TheThe ImpactImpact ofof ChinaChina • Quickly grew to dominate global textile markets • Key exporter of finished apparel, but is also a key importer of textiles • Over time, as China’s economy grows investment may move out of textiles into other higher value-added industries • China could become a net importer of apparel in the future BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD ChinaChina WillWill HaveHave RapidRapid Apparel/MadeApparel/Made--UpUp ExportExport GrowthGrowth ThruThru 20102010 50 45 40 35 30 Apparel 25 Made-Up 20 Billion US Dollars 15 10 5 0 1992 1995 2000 2002 2005 2010 2015 BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD ButBut WillWill bebe TemperedTempered byby RisingRising ChineseChinese ImportsImports ofof Apparel,Apparel, ReplacingReplacing DomesticDomestic OutputOutput OverOver TimeTime 12 10 8 Apparel Fabric 6 Fiber 4 Yarn Billion US Dollars 2 0 1992 1995 2000 2002 2005 2010 2015 BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Reason 10: TheThe ImpactImpact ofof ChinaChina’’ss CompetitorsCompetitors • Indian and Pakistani textile industries are major suppliers of yarns to China • Bangladesh is a key competitor in apparel • Will Vietnam and Cambodia become the apparel “tigers” in the future? Watch the textile investment to find out! BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China:China: Imports/ExportsImports/Exports ofof CottonCotton YarnYarn 600 400 200 0 Imports -200 Exports -400 -600 1,000 Metric Tons -800 -1000 '85 '90 '95 '00 '03 '04 '05 Source: ICAC BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD ConcludingConcluding RemarksRemarks • Global shifts in textile production … driving shifts in cotton purchasing patterns • Requires close attention to quality, price and varieties • In the long run, U.S. cotton export sales will not just support global textile exports but rising domestic textile consumption in China and elsewhere BUSINESS INTELLIGENCE
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