CEH Report

Table of Contents

Abstract

This study presents a global supply and demand analysis of natural fibers (cotton and wool) and man-made fibers (synthetic fibers and cellulosic fibers), broken out by major world regions. Because of regional differences in data collection methods certain fiber data for polyolefin fibers, as well as lyocell fibers, are not included in the world totals but can be found in the respective regional sections of this report.

In 2008, the global production of textile fibers was on target, through the first half of the year, to rise another 4%. While strong global demand for textile goods in the first half of the year was tempered by the need to raise fiber prices to counteract the rising fuel and raw material costs, there was an expectation that sales in the fourth quarter would correct any imbalance. However, the sudden financial collapse brought on by the subprime mortgage crisis in the United States had dramatic effects on banking systems across the world. By October 2008, demand for textile goods had softened significantly as home foreclosures rose and banks fought to stay afloat. Short-term loans were recalled and new carryover loans became impossible to get. By year-end 2008, the economy had sunk into a severe recession on a global basis. Demand for textile goods across all markets fell dramatically and global fiber production dropped 11% to a low of 61,160 thousand metric tons, down from a high of 68,926 thousand metric tons in 2007.

With the exception of China and Japan, as a result of the economic collapse, many fiber producers in the major world regions have had to restructure and close selected fiber facilities to remain solvent. While capacities in the United States and Western Europe declined 0.9% and 2.8%, respectively, man-made fiber capacity in the Other Asian countries fell at a slightly greater rate of –3.4% between 2008 and 2009.

The following pie chart shows world consumption of textile fibers:

For the first time, in 2008 China produced over half (51%) of the volume of natural and man-made fibers that were produced globally (excluding polyolefin and lyocell fibers), up from 45% of global production in 2007. Hard hit by the downturn in foreign demand, China’s fiber production barely rose by 0.8% above its 2007 production figure. For comparison, China’s fiber production in 2007 increased by 12.6% over its 2006 production level. As part of its recovery plan, the government of China has reinstated higher export tax rebates on select textile and apparel goods, instituted massive spending on domestic infrastructure projects and ordered its banks to provide carryover loans to the business sector. As a result, China, with an impressive 11.8% average annual increase since 2005, was the only country globally to see an increase in fiber consumption in 2008.

With its focus on very high-end, specialty fibers, Japanese fiber producers were able to not only maintain capacity but even to increase capacity by a slight 1.3% between 2008 and 2009. However, fiber production in 2008 fell by 14.7% in response to the global downturn and sluggish foreign demand for its goods. At the same time, consumer spending severely dropped off and as corporate earnings fell, domestic banks reduced and denied further corporate investment loans. As a result, most fiber producers reduced fiber production in an effort to maintain viability in the market. Japan’s 2008 fiber consumption was lower than 2007 levels by 5.8%.

Credit overages and reduced disposable income among consumers contributed to the significant decline in U.S. demand for textile goods in 2008. The late 2008 bank bailouts and the early 2009 adoption of the American Recovery and Reinvestment Act are designed to shore up the domestic industries.

While Western European fiber producers have continued to invest in state-of-the-art equipment and make high-quality specialty fibers and fabrics, Western European–produced textile fibers are still more costly than similar fibers in other world regions. Like the restructuring that occurred in the United States between 2005 and 2007, Western European fiber manufacturers have consolidated facilities and closed less-profitable facilities. Some have opted to exit fiber manufacturing in Europe altogether in favor of partnering and building new fiber manufacturing facilities in countries in Eastern Europe, the Middle East and Asia.