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BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Overview of the GlobalOverview of the GlobalTextile IndustryTextile Industry
Bangladesh Cotton & Textile ConventionBangladesh Cotton & Textile Convention20072007
Dhaka, BangladeshDhaka, Bangladesh
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Topics To Be Considered Topics To Be Considered ……
• Global Trends
• The Trade/Sourcing Outlook
• Impact of China
• Market Requirements forQuality Cotton
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
When Viewing Topics, Keep in Mind ...When Viewing Topics, Keep in Mind ...
• The worldwide textile industry is moving
into a slow-growth period
• After years of explosive growth, the
industry has matured
• China and the Indian Subcontinent have
had a enormous impact on the global
market for textiles
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
First, LetFirst, Let’’s Establish as Establish aBaseline Baseline ……
• Current forces affecting global textile
and apparel trade
– Aggregate production/consumption
– International trading patterns
– Tariff reductions under WTO
– Free trade agreements
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
ThereThere’’s been huge growth in worldwides been huge growth in worldwide
textile consumption over the years textile consumption over the years ……
Source: ICAC, Wool Bureau,
UN/FAO/Globecot Estimates
Thousand Tons
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
…… but the rate of growth is slowing but the rate of growth is slowing
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1770-1800
1800-1850
1850-1900
1900-1950
1950-2000
1950-1960
1960-1970
1970-1980
1980-1990
1990-2000
2000-2010
2010-2020
% G
row
th
Consumption Per Capita
Source: Globecot Calculations
2
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Worldwide cotton production isWorldwide cotton production isconcentrated in a few regions concentrated in a few regions ……
Based on Millions of 480-lb Bales
2004/5 Projected Production
Source: USDA
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
…… the same goes for worldwide the same goes for worldwidepolyester fiber production, toopolyester fiber production, too
2006 in Billion Pounds
Source: FEB
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Asian mills consume the most fiber Asian mills consume the most fiber ……
Billion Pounds, Cotton, Synthetics, Wool2006
Source: FEB
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
…… with the U.S. playing a greater role as an exporter with the U.S. playing a greater role as an exporter
of cottonof cotton…….and China playing a greater role as an.and China playing a greater role as an
importer of cottonimporter of cotton
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Cotton yarn is mostly made in Asia Cotton yarn is mostly made in Asia ……
Source: ICAC; 2005/2006 forecast by ICAC
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
…… the same is true in cotton fabric. the same is true in cotton fabric.
Source: ICAC; 2005/2006 forecast by ICAC
3
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Asia buys the most textile equipmentAsia buys the most textile equipment
globally globally ……
Source: ITMF
(Cumulative Weaving Machine Shipments 1990-1999)(Cumulative Weaving Machine Shipments 1990-1999)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
The largest apparel importersThe largest apparel importersare in the developed world are in the developed world ……
Source: UN (Imports in 2004)(Imports in 2004)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
…… while the largest apparel exporters while the largest apparel exportersare in the developing worldare in the developing world
Source: UN(Exports in 2004)(Exports in 2004)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
The other side of the equation The other side of the equation ……
The Impact of ChinaThe Impact of China
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Current State of the ChineseCurrent State of the Chinese
IndustryIndustry
• Key factors affecting industry growth:
– Internal advantages• Low-cost labor
• Large raw material supply
• Huge export platform
• Growing domestic demand
– External factors• Foreign investment and technical know-how
• Expanding global market (for now)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
25
75
125
175
2002 2003 2004 2005 2006
In b
illi
ons
of y
uan
FAI
$4.6 billion
$10.5 billion
$13.2 billion
$18.56 billion
$23.68 billion
FAI in Textile Industry Sets theFAI in Textile Industry Sets the
Stage for ChinaStage for China’’s Future Growths Future Growth
4
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China Already has a Huge Share ofChina Already has a Huge Share ofGlobal Textile CapacityGlobal Textile Capacity……and Risingand Rising
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Overview of ChinaOverview of China’’ss
Textile IndustryTextile Industry
• Production expanding, but varies by sector
• Fibers– Strong competition for cotton from polyester staple
• Yarns– New growth after industry rationalization
• Fabrics– Slowly improving quality, improved export sales
• Apparel and made-ups– Strong export growth drives production, but the future
may be in the hands of Chinese consumers
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China: Spinning Capacity andChina: Spinning Capacity and
Spun Yarn OutputSpun Yarn Output
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China:China:
International Trade SummaryInternational Trade Summary• Despite quotas in the U.S. and EU thru
2004 and more recent safeguards, Chinahas rapidly expanded exports
– But expansion comes after a period of flatexport growth
• For imports, China remains a dominantimporter of basic yarns and fabrics
– In particular, China imports heavily from otherAsian suppliers
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China imports more cotton yarn
than it exports
10,000
20,000
30,00040,000
50,000
60,000
70,00080,000
90,000
100,000
Jan '0
5M
arM
ayJuly
Sept
Nov
Jan. 0
6M
arM
ayJuly
Sept
Nov
Jan '0
7Feb
in t
on
s
Exports Imports
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China:China: Domestic ApparelDomestic ApparelConsumptionConsumption
• Although domestic demand is weak today, strong
growth is forecast for the future– Urban apparel sales drive current domestic consumption
– Rural consumers may take on greater role in the future
• If they do, apparel sales will skyrocket
• If they don’t, apparel sales will increase based primarily on the buying
power of urban consumers
– Home textile sales will also be important based on continued
expansion of housing in rural areas
5
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China: Per Capita Annual Expenditure onChina: Per Capita Annual Expenditure onApparel/AccessoriesApparel/Accessories
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China:China:Outlook for the FutureOutlook for the Future
– Trade• Growth in apparel exports will slow between 2010-
2015, in turn, impacting production
• Textile exports will increase through the end of thedecade, but then decline
• Market saturation will begin to occur before the endof the decade and accelerate towards 2015
• China will become an even larger importer oftextiles – but also by 2015, China will be a majorimporter of finished apparel
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China Becomes DominantChina Becomes Dominant
Supplier of U.S. Apparel ImportsSupplier of U.S. Apparel Imports
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China Will Have Rapid Apparel/Made-UpChina Will Have Rapid Apparel/Made-UpExport Growth Thru 2010Export Growth Thru 2010
0
5
10
15
20
25
30
35
40
45
50
1992 1995 2000 2002 2005 2010 2015
Bil
lio
n U
S D
oll
ars
Apparel
Made-Up
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
But Will be Tempered by Rising ChineseBut Will be Tempered by Rising Chinese
Imports of Apparel, Replacing DomesticImports of Apparel, Replacing Domestic
Output Over TimeOutput Over Time
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
So what do these changes meanSo what do these changes meanfor textile producers around thefor textile producers around the
world?world?
For one thing, textile mills willFor one thing, textile mills willwant to run better cotton.want to run better cotton.
Why?Why?
6
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Spinners Around The WorldSpinners Around The WorldDemand Better Quality Cotton Demand Better Quality Cotton ……
• Competitive advantage
• Supply chain looks for it
• Options can be limited depending
upon price and supply
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
So What Do Spinners SaySo What Do Spinners SayAbout Cotton Quality?About Cotton Quality?
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Cotton Board SurveyCotton Board Survey• Recently conducted by Globecot with
more than 100 spinners around the world
• Survey results provide insight into thoseissues that will most likely affect currentand future fiber processing requirements
• Also, survey results provide valuableinsights for maintaining the exportbusiness
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Expansion of Asian textileExpansion of Asian textileindustry necessitates highindustry necessitates high
quality for cottonquality for cotton
• Longer staple length
• Better color, lower contamination
• Improved inspection procedures
• Better delivery
• Transparent business interactions
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Issues With U.S. CottonIssues With U.S. Cotton
• Quality cited as an important
deterrent to buying more U.S.
cotton
– Stickiness
– Small problem has much wider
influence
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Issues With U.S. CottonIssues With U.S. Cotton• Staple length can be an important
deterrent to buying more U.S.cotton
– U.S. Memphis/Eastern crop hashistorically moved to domestic mills
– But with downsizing of domesticindustry, growers forced to find newbusiness off-shore
– However …
7
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Issues With U.S. CottonIssues With U.S. Cotton• As overseas spinners have
upgraded their equipment, theytend to run longer staple cotton
– SLM 1-1/16” had been the standard
– M 1-3/32” is the new standard
– Most spinners overseas knowrelatively little aboutMemphis/Eastern
– Had to sell at big discounts
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Survey Question:
“What factors would prompt you to buy
more U.S. cotton?”
• Improved quality: 62.12 %
• More familiarity with U.S.
growths: 56.93 %
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Concluding RemarksConcluding Remarks
• Global shifts in textile production … driving shiftsin cotton purchasing patterns
• Requires close attention to quality, price andvarieties
• In the long run, U.S. cotton export sales will notjust support global textile exports but risingdomestic textile consumption in China andelsewhere
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Concluding RemarksConcluding Remarks
• China’s growth will be offset bydeclining consumption in the developedworld
• Further changes to the global textilebusiness will be affected by changingdemographics– Age
– Buying power
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Concluding RemarksConcluding Remarks
• China will only be a textile exportjuggernaut for a fixed period of time …perhaps 10 years, 15 years?
• In order to maintain market share,suppliers will be forced to evaluate theirfocus on quality versus quantity– Choice of production
– Future viability at stake
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Concluding RemarksConcluding Remarks
• Will new free trade agreements
accelerate global shifts in the textile
business?
• Biggest wildcard: How will China
“The Consuming Nation” alter the
global textile business?