business intelligence for an interwoven world overview of the global textile industry bangladesh...
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BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Overview of the Overview of the Global Textile Global Textile
IndustryIndustryBangladesh Cotton & Textile Bangladesh Cotton & Textile
Convention 2007Convention 2007Dhaka, BangladeshDhaka, Bangladesh
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Topics To Be Topics To Be Considered …Considered …
• Global Trends • The Trade/Sourcing Outlook• Impact of China• Market Requirements for Quality Cotton
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
When Viewing Topics, Keep in When Viewing Topics, Keep in Mind ...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, Let’s Establish a First, Let’s Establish a Baseline …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
There’s been huge growth in There’s been huge growth in worldwide textile consumption over worldwide textile consumption over
the years …the years …
1400
1600
2200
3893
9939
53609
0 10000 20000 30000 40000 50000 60000
1770
1800
1850
1900
1950
2005
Source: ICAC, Wool Bureau, UN/FAO/Globecot Estimates
Thousand Tons
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
… … but the rate of growth is but the rate of growth is slowingslowing
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
Source: Globecot Calculations
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Worldwide cotton production Worldwide cotton production is concentrated in a few is concentrated in a few
regions …regions …
Turkey4%
Uzbekistan4%
Pakistan8%
India12%
Others26%
US17%
China29%
Based on Millions of 480-lb Bales2004/5 Projected Production
Source: USDA
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
… … the same goes for the same goes for worldwide polyester fiber worldwide polyester fiber
production, tooproduction, too
Jap/Tai/Kor25%
China35%
Oth. Asia19%
US8%
W. Eur.5%
E. Eur/Turk4%
NAFTA/Amer.4%
2006 in Billion PoundsSource: FEB
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Asian mills consume the most Asian mills consume the most fiber …fiber …
Asia64%
Western Europe12%
South America6%
North America18%
Billion Pounds, Cotton, Synthetics, Wool 2006
Source: FEB
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
… … with the U.S. playing a greater role as an with the U.S. playing a greater role as an exporter of cotton….and China playing a exporter of cotton….and China playing a greater role as an importer of cottongreater role as an importer of cotton
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Cotton yarn is mostly made in Cotton yarn is mostly made in Asia …Asia …
Source: ICAC; 2005/2006 forecast by ICAC
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
… … the same is true in cotton the same is true in cotton fabric.fabric.
Source: ICAC; 2005/2006 forecast by ICAC
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Asia buys the most textile Asia buys the most textile equipment globally …equipment globally …
0
50
100
150
200
250
300
350
400
450
Africa NorthAmerica
SouthAmerica
Asia &Oceania
EasternEurope
WesternEurope
OtherEurope
1,0
00
Loom
s
Source: ITMF
(Cumulative Weaving Machine Shipments 1990-(Cumulative Weaving Machine Shipments 1990-1999)1999)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
The largest apparel The largest apparel importers are in the importers are in the developed world …developed world …
0 10 20 30 40 50 60 70
Billions of U.S. Dollars ($)
U.S.
E.U. (extra)
Japan
Hong Kong
Mexico
Canada
Russia
Switzerland
Korea
Australia
Singapore
Norway
China
Source: UN (Imports in (Imports in 2004)2004)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
… … while the largest apparel while the largest apparel exporters are in the developing exporters are in the developing
worldworld
0 10 20 30 40 50
Billions of U.S. Dollars ($)
China
Hong Kong
E.U. (extra)
Turkey
Mexico
U.S.
Bangladesh
Indonesia
Korea
Thailand
Romania
Tunisia
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 The Impact of ChinaChina
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Current State of the Current State of the Chinese IndustryChinese 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)
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
25
75
125
175
2002 2003 2004 2005 2006
In b
illi
on
s o
f y
ua
n
FAI
$4.6 billion
$10.5 billion
$13.2 billion
$18.56 billion
$23.68 billion
FAI in Textile Industry Sets FAI in Textile Industry Sets the Stage for China’s the Stage for China’s
Future GrowthFuture Growth
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China Already has a Huge Share China Already has a Huge Share of Global Textile Capacity…and of Global Textile Capacity…and
RisingRising
05
1015202530354045
RingSpindles
O-ERotors
ShuttleLooms
Shuttle-less
Looms
CottonShuttleLooms
CottonShuttle-
lessLooms
Perc
ent
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Overview of China’s Overview of China’s 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
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China: Spinning Capacity China: Spinning Capacity and Spun Yarn Outputand Spun Yarn Output
0
10
20
30
40
50
60
1996 1997 1998 1999 2000 2001 2002
Millio
ns o
f S
pin
dle
s
0
1
2
3
4
5
6
7
8
9
Millio
ns o
f To
ns o
f Ya
rn
Yr-End Spindles Total Spun Yarn Output
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China:China:International Trade International Trade
SummarySummary• 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
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China imports more cotton yarn than it exports
10,00020,00030,00040,00050,00060,00070,00080,00090,000
100,000
in t
ons
Exports Imports
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China:China: Domestic Domestic Apparel ConsumptionApparel 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
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China: Per Capita Annual China: Per Capita Annual Expenditure on Expenditure on Apparel/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
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
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China Becomes Dominant China Becomes Dominant Supplier of U.S. Apparel Supplier of U.S. Apparel
ImportsImports
0
2
4
6
8
10
12
1995
2000
2005
2010
Bil
lion
SM
E
Domestic Mexico CBI China
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
China Will Have Rapid China Will Have Rapid Apparel/Made-Up Export Growth Apparel/Made-Up Export Growth
Thru 2010Thru 2010
05
101520253035404550
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 But Will be Tempered by Rising Chinese Imports of Apparel, Chinese Imports of Apparel,
Replacing Domestic Output Over TimeReplacing Domestic Output Over Time
0
2
4
6
8
10
12
1992 1995 2000 2002 2005 2010 2015
Billio
n U
S D
olla
rs ApparelFabricFiberYarn
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
So what do these changes So what do these changes mean for textile producers mean for textile producers
around the world?around the world?
For one thing, textile mills For one thing, textile mills will want to run better will want to run better
cotton.cotton.
Why?Why?
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Spinners Around The World Spinners Around The World Demand Better Quality Demand Better Quality
Cotton …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 So What Do Spinners Say About Cotton Say About Cotton
Quality?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 those issues that will most likely affect current and future fiber processing requirements
• Also, survey results provide valuable insights for maintaining the export business
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Expansion of Asian Expansion of Asian textile industry textile industry
necessitates high necessitates high quality for cotton quality for cotton
• Longer staple length• Better color, lower contamination• Improved inspection procedures• Better delivery• Transparent business interactions
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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 has
historically moved to domestic mills
– But with downsizing of domestic industry, growers forced to find new business off-shore
– However …
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Issues With U.S. CottonIssues 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
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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
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 FOR AN INTERWOVEN WORLD
Concluding RemarksConcluding Remarks• 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
BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD
Concluding RemarksConcluding Remarks• 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