Press Release Summary = The textile world flattened further in 2006. In 2005, trade quotas were abolished, thus ending decades of control and incentives for inefficiencies. This was the beginning of the flattening of textile world. Although the overall growth rate of textile production was secular, there were significant developments on the trade frontiers.
Press Release Body = The textile world flattened further in 2006. In 2005, trade quotas were abolished, thus ending decades of control and incentives for inefficiencies. This was the beginning of the flattening of textile world. Although the overall growth rate of textile production was secular, there were significant developments on the trade frontiers. Vietnam got entry into the WTO group of countries in 2006. Giants like India and China which ramped up their exports in 2005, witnessed the steep growth tapering away in 2006. While China's exuberance was limited by barriers of USA and EU beginning 2006, India on the other hand, along with China, was losing to fresh wave of competition from smaller players like Bangladesh, Vietnam, Cambodia and Indonesia in USA's apparel market.
India, Indonesia and Pakistan were major trade gainers in 2005, of course with China on the top. These countries saw their rank in world trade move up the ladder. However, 2006 saw emergence of smaller players in global textile trade.
In 2007, the industry would continue to expand further in Asian region in terms of investments and supplies. Today, Asia is the major producer of synthetic textiles. Trade competition will hot up further as smaller countries will be catching up with low cost production levels of India and China. Middle East will be thriving on supplies of raw material to textile industry in Asia. There could be a likely slow down in USA economy in 2007, which will impose bigger challenges to its exporters. China will have to wait for 2007 to end to reap the benefits of open and frictionless trade. India will be preparing to go up the value chain to capture niche markets worldwide. Crude oil prices will stabilize between US$55-60 a barrel, unless blighted by geopolitical issues and Hurricanes.
In 2006, oil prices did impact synthetic textiles via fibre intermediates. PTA/MEG which produces polyester comes from paraxylene and ethylene which in turn are produced of naphtha, a petroleum base product. Similarly, acrylonitrile - for acrylic fibre, comes from propylene via naphtha. Nylon is produced from caprolactum which comes from benzene, again a petroleum based product. Thus, you see the entire synthetic textile chain is tied up with crude oil.
Let us review what happened in Asian market. Crude oil was dearer by 17-21% in 2006. Trickling down, naphtha prices rose 20%. Impact on downstream - paraxylene and ethylene prices increased sharply by 24%. Propylene was dearer by 16% and benzene by 8%. These increase percolated unto the fibre intermediates. PTA and acrylonitrile prices rose 12% in 2006. However, caprolactum prices averaged down by 4% but were seen rising sharply by 20% in November and December 2006. The impact was apparently belated on caprolactum in 2006. Now let us review the impact on synthetic fibres. While most of products prices until the fibre intermediate stage have direct input cost effect, fibre and filament yarn prices are generally governed by demand/supply balance and have lesser direct impact of input costs. With this underlying, polyester fibre prices rose 5% over and above the 9% rise of 2005. In contrast, polyester filament yarns were cheaper by 1% but from a high base growth of 12% (in 2005). Acrylic staple fibre prices shot up 6% on top of 10% in 2005. Nylon filaments yarns prices, however, declined 6% largely owing to softening of caprolactum prices. Thus, overall values of synthetic fibre and yarn were adversely impacted by the rising crude oil prices in 2006.
Cotton supply was ample this season and prices were range bound with no upheavals. 2006/07 world cotton production is forecast at 24.9 million tons, up 1% from last season. Driven by China, world cotton consumption is forecast at 25.5 million tons in 2006/07, up 3% from last season. The Cotlook A index averaged 56 cents per pound marginally less than previous season's average.