Overview of the Global Textile Industry

1. Overview of the Global Textile Industry Bangladesh Cotton & Textile Convention 2007 Dhaka, Bangladesh

2. Topics To Be Considered … • Global Trends • The Trade/Sourcing Outlook • Impact of China • Market Requirements for Quality Cotton

3. 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

4. First, Let’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

5. There’s been huge growth in worldwide textile consumption over the years … Thousand Tons Source: ICAC, Wool Bureau, UN/FAO/Globecot Estimates

6. … but the rate of growth is slowing Source: Globecot Calculations

7. Worldwide cotton production is concentrated in a few regions … Based on Millions of 480-lb Bales 2004/5 Projected Production Source: USDA

8. … the same goes for worldwide polyester fiber production, too 2006 in Billion Pounds Source: FEB

9. Asian mills consume the most fiber … Billion Pounds, Cotton, Synthetics, Wool 2006 Source: FEB

10. … with the U.S. playing a greater role as an exporter of cotton….and China playing a greater role as an importer of cotton

11. Cotton yarn is mostly made in Asia … Source: ICAC; 2005/2006 forecast by ICAC

12. … the same is true in cotton fabric. Source: ICAC; 2005/2006 forecast by ICAC

13. Asia buys the most textile equipment globally … (Cumulative Weaving Machine Shipments 1990-1999) Source: ITMF

14. The largest apparel importers are in the developed world … (Imports in 2004) Source: UN

15. … while the largest apparel exporters are in the developing world (Exports in 2004) Source: UN

16. The other side of the equation …The Impact of China

17. 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)

18. FAI in Textile Industry Sets the Stage for China’s Future Growth $23.68 billion $18.56 billion $13.2 billion $10.5 billion $4.6 billion

19. China Already has a Huge Share of Global Textile Capacity…and Rising

20. 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

21. China: Spinning Capacity and Spun Yarn Output

22. 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

23. China imports more cotton yarn than it exports

24. 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

25. China: Per Capita Annual Expenditure on Apparel/Accessories

26. 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

27. China Becomes Dominant Supplier of U.S. Apparel Imports

28. China Will Have Rapid Apparel/Made-Up Export Growth Thru 2010

29. But Will be Tempered by Rising Chinese Imports of Apparel, Replacing Domestic Output Over Time

30. So what do these changes mean for textile producers around the world? For one thing, textile mills will want to run better cotton. Why?

31. Spinners Around The World Demand Better Quality Cotton … • Competitive advantage • Supply chain looks for it • Options can be limited depending upon price and supply

32. So What Do Spinners Say About Cotton Quality?

33. 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

34. 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

35. Issues With U.S. Cotton • Quality cited as an important deterrent to buying more U.S. cotton • Stickiness • Small problem has much wider influence

36. 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 …

37. 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

38. 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 %

39. Concluding 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

40. Concluding 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

41. Concluding 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

42. Concluding 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?