New York, Oct. 27--The price of underwear or sheets might not be going up anytime soon, but world cotton prices -- at their highest in five years -- may be sounding the death knell for the U.S. textile industry, experts say.
"With higher prices, any chance of a modest recovery in domestic mills will be dashed," Sharon Johnson, a cotton expert at trader Frank Schneider & Co. Inc. in Atlanta, told Reuters this week.
"[High cotton price] doesn't help and pushes [mills] much closer to the brink," said John Flanagan, president of brokers Flanagan Trading Corp. in North Carolina. "It's a tragedy how quickly the textile industry has vaporized."
Asked if a rebound was possible, Flanagan said: "No. Once a plant closes, it is packaged up and moved overseas. The United States can't compete with others, especially China, because of their low cost of labor."
With so many American mills already either in bankruptcy or operating factories in cheaper labor markets overseas, will that mean more expensive shirts and other cotton goods?
"We might see some higher prices, but with the consumer in the U.S. so resistant to price, it's unlikely they can raise prices enough," said Richard Hastings, a retail analyst with credit services firm Bernard Sands.
"WMT (Wal-Mart Stores) isn't going to do anything. They don't want customers to flip out." That means the battered textile industry will swallow the cotton price increase.
Last week, prices that have already risen 38 percent this year hit a five-year high of over 75 cents per pound, sparked by concern about poor weather harming the new crop in China, the world's largest cotton producer and consumer.
That, combined with China's growing stake in the U.S. apparel market, has the domestic textile industry reeling again after three years of factory closures, bankruptcies and mills moving operations overseas.
Just three months ago, Pillowtex Corp., a leading U.S. sheet, bath rug and towel maker, closed its 16 plants and laid off 6,450 workers, becoming the latest textile company to succumb to overcapacity and foreign competition.
Pillowtex, the Kannapolis, North Carolina-based manufacturer of Cannon and Fieldcrest home furnishings, in July filed for Chapter 11 bankruptcy protection for a second time in two years.
It was the single largest loss of textile jobs ever in an industry that has dropped from 606,000 workers in 1998 to 409,000 by April 2003, according to the trade group American Textile Manufacturers Institute. Other recent big bankruptcy filings include WestPoint Stevens (WSPTE.OB: Quote, Profile, Research), Burlington Industries (BRLG.OB: Quote, Profile, Research), Malden Mills and Fruit of the Loom.
Last month, an ATMI study said China now controls 53 percent of the U.S. market for apparel products removed from quota control. It projects that, by the end of the year, China will likely control two-thirds of the market for apparel products removed from quota control, and by the end of 2004, up to 75 percent.
"Up to 100 'Pillowtex-type' total company shutdowns are likely if China is not restrained," said the institute.
Johnson noted that in six years, cotton consumption by U.S. mills has halved. In 1997 domestic mills used 11.3 million bales, while current USDA estimates are for 6.4 million in 2003-4. With price increases, that is likely to be realistically 5.5 million bales, she said.
"There will be more of the same -- consolidations, bankruptcies, outsourcing and firms moving production overseas. The process will be hastened by this hard run-up in prices."
Johnson said there will also be "a rationing process" globally and mills will be using more synthetic textiles.
