Overview of the Global Textile Industry Bangladesh Cotton & Textile Convention 2007 Dhaka, Bangladesh Topics To Be Considered Global Trends The Trade/Sourcing Outlook Impact of China Market Requirements for Quality Cotton 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 First, Let s s Establish a Baseline Current forces affecting global textile and apparel trade Aggregate production/consumption International trading patterns Tariff reductions under WTO Free trade agreements There s s been huge growth in worldwide textile consumption over the years Thousand Tons Source: ICAC, Wool Bureau, UN/FAO/Globecot Estimates but the rate of growth is slowing % Growth 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Source: Globecot Calculations 1770-1800 1800-1850 1850-1900 1900-1950 1950-2000 1950-1960 Consumption 1960-1970 1970-1980 1980-1990 Per Capita 1990-2000- 2010-2000 2010 2020 1
Worldwide cotton production is concentrated in a few regions the same goes for worldwide polyester fiber production, too Source: USDA Based on Millions of 480-lb Bales 2004/5 Projected Production Source: FEB 2006 in Billion Pounds Asian mills consume the most fiber with the U.S. playing a greater role as an exporter of cotton.and China playing a greater role as an importer of cotton Source: FEB Billion Pounds, Cotton, Synthetics, Wool 2006 Cotton yarn is mostly made in Asia the same is true in cotton fabric. Source: ICAC; 2005/2006 forecast by ICAC Source: ICAC; 2005/2006 forecast by ICAC 2
Asia buys the most textile equipment globally The largest apparel importers are in the developed world Source: ITMF (Cumulative Weaving Machine Shipments 1990-1999) Source: UN (Imports in 2004) while the largest apparel exporters are in the developing world The other side of the equation The Impact of China Source: UN (Exports in 2004) Current State of the Chinese Industry 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) FAI in Textile Industry Sets the Stage for China s s Future Growth In billions of yuan $23.68 billion 175 $18.56 billion 125 $13.2 billion $10.5 billion 75 $4.6 billion 25 2002 2003 2004 2005 2006 FAI 3
China Already has a Huge Share of Global Textile Capacity and and Rising Overview of China s Textile 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 China: Spinning Capacity and Spun Yarn Output China: International Trade Summary Despite quotas in the U.S. and EU thru 2004 and more recent safeguards, China has rapidly expanded exports But expansion comes after a period of flat export growth For imports, China remains a dominant importer of basic yarns and fabrics In particular, China imports heavily from other Asian suppliers in tons China imports more cotton yarn than it exports 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Jan '05 Mar May July Sept Nov Jan. 06 Exports Mar May Imports July Sept Nov Jan '07 Feb China: Domestic Apparel Consumption 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 4
China: Per Capita Annual Expenditure on Apparel/Accessories China: Outlook 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 the decade, but then decline Market saturation will begin to occur before the end of the decade and accelerate towards 2015 China will become an even larger importer of textiles but also by 2015, China will be a major importer of finished apparel China Becomes Dominant Supplier of U.S. Apparel Imports China Will Have Rapid Apparel/Made-Up Export Growth Thru 2010 Billion US Dollars 50 45 40 35 30 25 20 15 10 5 0 1992 1995 2000 2002 2005 2010 2015 Apparel M ade-up But Will be Tempered by Rising Chinese Imports of Apparel, Replacing Domestic Output Over Time So what do these changes mean for textile producers around the world? For one thing, textile mills will want to run better cotton. Why? 5
Spinners Around The World Demand Better Quality Cotton Competitive advantage Supply chain looks for it Options can be limited depending upon price and supply So What Do Spinners Say About Cotton Quality? Cotton Board Survey Recently conducted by Globecot with more than 100 spinners around the world Survey results provide insight into those issues that will most likely affect current and future fiber processing requirements Also, survey results provide valuable insights for maintaining the export business Expansion of Asian textile industry necessitates high quality for cotton Longer staple length Better color, lower contamination Improved inspection procedures Better delivery Transparent business interactions Issues With U.S. Cotton Quality cited as an important deterrent to buying more U.S. cotton Stickiness Small problem has much wider influence Issues With U.S. Cotton Staple length can be an important deterrent to buying more U.S. cotton U.S. Memphis/Eastern crop has historically moved to domestic mills But with downsizing of domestic industry, growers forced to find new business off-shore However 6
Issues With U.S. Cotton As overseas spinners have upgraded their equipment, they tend to run longer staple cotton SLM 1-1/16 had been the standard M 1-3/32 is the new standard Most spinners overseas know relatively little about Memphis/Eastern Had to sell at big discounts 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 % 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 China s growth will be offset by declining consumption in the developed world Further changes to the global textile business will be affected by changing demographics Age Buying power China will only be a textile export juggernaut for a fixed period of time perhaps 10 years, 15 years? In order to maintain market share, suppliers will be forced to evaluate their focus on quality versus quantity Choice of production Future viability at stake 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? 7