Posted March 8, 2017

 

By Devin Steele (DSteele@eTextileCommunications.com)

 

BELMONT, N.C. – After Division Chairman Carson Copeland of Valdese Weavers reported new membership numbers during the Southern Textile Association’s (STA’s) Winter Technical Seminar here last month, first speaker Alasdair Carmichael quickly added context to what growth means for a textile industry organization these days.

 

“It's always good to hear about new members,” said Carmichael of PCI Wood Mackenzie. “A lot of people outside the industry just don't believe we're a growing industry. And while we're nowhere near where we were in the '90s, it's certainly evidence of a resurgence going on the business right now. It's very encouraging.”

 

Nearly 100 members and guests turned out for the annual half-day event, which featured five presentations.

 

Carmichael, a subject matter expert in his field and a popular speaker on the “textile circuit,” provided an overview of the world fibers market.

 

“Really, we had a very flat first eight or nine months of the year (2016) in terms of synthetic fibers and in terms of what was happening in raw materials,” he said in his introductory remarks. “But at the end of the year, things started to shift. It all goes back to the meeting that OPEC had at the end of November, where they made the decision to restrict production of oil, and they actually got Russia to participate in the cutbacks on oil volumes.

 

“That didn't send oil prices rocketing – they moved up a little – but it really had an effect downstream and gave a renewed confidence, particularly by the Chinese, that they could move price increases through the system,” he added. “And that's what you're feeling right now when you go and talk to your friendly polyester, nylon or acrylic sales person. Their prices are up and it all goes back to the raw materials side of the business.”

 

In providing a big-picture look, Carmichael noted that, excluding polyester, all major fibers are on target to grow 86 percent in millions of tons from 1980 to 2030. But including polyester, fiber growth is on a 310 percent upward trajectory during that period, he added.

 

“Love it or hate it, it's the dominant fiber going forward and it continues to gain share from other fibers,” Carmichael said. “And it's not just a price issue – it's performance, too. Polyester performance has improved dramatically over the years.”

 

China, after entering the World Trade Organization in 2000, has come to dominate polyester production, surpassing the rest of the world in 2005 and doubling the rest of the world by 2012, he pointed out. Of the 12 largest polyester producers in the world, nine of them are located in China – and two of the non-Chinese companies have operations there, he added.

 

Carmichael went on to discuss China’s strategic competitiveness policies going forward, before doing a deep dive into other fiber markets, production, consumption and a comparison of cotton and polyester.

 

Looking ahead, Carmichael said that oil prices are expected to continue to increase and reach $60/barrel by the fourth quarter. He added that natural gas will make the U.S. the low-cost producer of ethylene and MEG for polyester, but it will be 2018-19 before the impact hits the U.S. market.

 

Polyester prices, meanwhile, have increased sharply in the first quarter and are expected to gradually continue to rise through the rest of the year, he said. He added that he expects the cotton market to remain stable this year, thanks to an anticipated good crop.

 

With the China supply chain model changing, continued investment in other areas of the world should be expected, Carmichael said. He noted U.S. investments by Norafin, a Germany-based nonwovens producer; and Labon, a China-based fiber and textile manufacturer, in the Carolinas; along with Japan-based Toyoba, which is doubling airbag weaving capacity in Alabama. Additionally, he listed foreign direct investment by such companies as Suzhou Tianyan Garments Co., King Charles Industries, Everest Textiles, Lenzing, Teijin and CS Carolina.

 

“What is the common thread in all these?” he asked. “These are all foreign companies. Where are we, guys? Based on recent expansions, does the rest of the world see more opportunity in the U.S. textile chain than the U.S. does? They are seeing real opportunities here. These were all on the books way before Trump got elected. They see the strength of the U.S. economy, cheap energy, consistent energy, and they’re willing to put their money where their mouth is.”

 

He also touched on the possible effect the new U.S. administration could have on world trade, especially with the inclusion of Secretary of Commerce Wilbur Ross, whose investment firm has owned a number of manufacturing companies, including International Textile Group (ITG). With Ross, the U.S. will probably be tougher on unfair trade practices than in the past, Carmichael said.

 

Economist: Expect faster growth

 

Anthony Chan, chief economist for Asset Management, JP Morgan Securities, LLC, said he is expecting good economic growth under the Trump Administration.

 

“The U.S. economy is doing very well,” said Chan, a frequent guest on national business programs. “Last year, the economy grew at 1.6 percent, and the question is, what's going to happen this year? Clearly, it's going to grow faster, and that was going to happen even before the election. I had a forecast of about 2.2 percent economic growth this year. After the election I felt even more comfortable – and this is non-partisan.

 

“I really feel good, because whether or not you supported the president, you have to be honest with yourself and listen to what the president is saying and doing,” he added. “He's bringing in a lot of business people into the administration. He certainly is pro-jobs, and I believe more jobs are going to be created.”

 

Chan added that he is encouraged that Ross and Secretary Treasurer Steve Mnuchin have been talking about 3 to 4 percent GDP growth.

 

“I think that's a goal, but we're not going to get there right away,” Chan said. “We're probably going to grow 2.5 percent next year, and that is not a number to apologize for or to be ashamed of. It's a great number. The president is talking about doing a lot of things to make the economy grow faster, and I think that is going to happen. For example, reducing federal regulations.”

 

In addition, productivity is expected to grow, business investment will begin to increase and corporate tax rates are expected to be lowered – all of which will trigger economic growth, he said. Oh, and tax cuts will continue to push up consumer spending, he added.

 

“I feel like Oprah,” Chan said. “I want to say, ‘you’re going to get a tax cut, you’re going to get a tax cut, you’re going to get a tax cut.’ ”

 

Machine learning important

 

The group also heard from Peter Darragh, vice president of Delivery for Mariner, Charlotte, N.C., who presented, “Machine Learning – Everything They Don’t Want.” Machine learning is important because it is the apex of digital business, and digital business is new, he said.

 

Digital business, he said, denudes or makes irrelevant the rare assets of companies’ competitors, Darragh said. It also enhances the performance of physical assets and transforms the value chain from selling products and services to selling outcomes, he added.

 

Machine learning, a.k.a. data mining and predictive analysis, is the application of statistical techniques to create behavioral models that learn from the past to: identify situations/things; forecast something; find problems; and find patterns and clusters, he said.

 

E-commerce ‘changing everything’

 

Paul Thompson, founder and chairman of Transportation Insight, LLC, Hickory, N.C., discussed “e-Commerce and Supply Chain: Digitally Enabled Consumers Change the Game.”

 

Because retail e-commerce is “changing everything” – experiencing sales of $101.3 billion in the third quarter of 2016, or 8.4 percent of total retail sales – businesses must now evolve through technology to meet multi-channel consumer-buying demands, he said. And that is impacting the U.S. transportation market, he added.

 

“LTL (less than load) and parcel transportation are seeing cost increases at higher rates than Producer Price Index (PPI),” Thompson said. “Transportation costs as a percentage of sales continue to rise, squeezing profit and operating margins.”

 

But omni-channel shipping not the only transportation concern, he added.

 

“Drivers and carriers identify ELDs (electronic logging devices) and hours of service as priority issues,” he said. “And roads are getting massively congested. We haven’t spent money on infrastructure in last 20 years like we did previous 20 years.”

 

In the coming years, the trucking industry will need 890,000 new drivers, with 45 percent of those replacing retiring drivers, he said. Industry growth will account for 33 percent of new driver hires, he noted.

 

Engaging, keeping employees

 

Wrapping up the day was Fredrick Reese, president and CEO of WCI, Inc.

He spoke on finding and keeping the best employees.

 

“You want to hire someone’s hands, head and heart,” he said. “You need people who care about whether or not you’re growing. Your goal is to be the employer of choice – not to become one, but to be one.”

 

To do so, employers must see employees as a customer/partner and understand their needs, Reese said. The “Holy Trinity” of great employers, and in effect great employees, he said, is: 1) communicate clear expectations; listen to their opinions; and give recognition.

 

Engaged employees, he added, know what’s expected; have the resources to get the job done; feel they are personally cared for; feel affirmed and complimented; have friends at work; have a good work/life balance; feel listened to; and understand their role/contribution to the big picture.

 

The No. 1 reason for turnover is lack of respect, Reese pointed out. While money is down on the list, low pay is another sign of disrespect, he added.

 

“Most employees don’t quit their company, they quit their boss,” he said.