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Friday, 1 June, 2001, 21:01 GMT 22:01 UK
Cotton industry faces tough times
DuPont website
DuPont is feeling the squeeze from a weak apparel market
By BBC News Online's North America Business Reporter, David Schepp

Cotton consumption and production are at all-time lows in the United States.

A combination of factors, including plentiful supplies from other countries, weak domestic demand and a lack of any natural disasters, have colluded to reduce prices on the New York Commodities Exchange to levels not seen since the 1980s.

Compounding matters is a recent report by the US government that showed US cotton consumption was down sharply from its estimates.

And cotton production figures could only get worse as textiles mills across the US shut up in response to a strong dollar and high energy costs.

Another shift south

The problems bedevilling the US cotton industry are not unlike those that threatened and eventually did in New England textile mills in the middle part of the 20th century.

In the 1950s, northern textile mills shut up in droves in response to the high cost of doing business in the Northeast. They headed south to the cotton-producing regions of the country where cheaper labour could also be found.

Now textile mills are pulling up roots and heading south again - to Mexico, where a pool of cheap labour may help struggling companies survive a fiercely competitive cotton business.

"It's been known for some time that the US textile industry is on the way out," says Keith Brown, president of commodity trading firm Keith Brown & Co.

"The core problem with shrinking cotton consumption by US mills is the shrinking US mill customer base," says Nick Hahn, chief executive at textile advisory firm Hahn International.

"We are closing plants at an accelerating rate. And several of the largest cotton consuming companies are in Chapter 11 [bankruptcy protection]," Mr Hahn says.

Shuttering plants

The makers of the some the most well-known US labels are shuttering plants as part of restructuring programmes related to bankruptcy.

Pillowtex, the maker of Fieldcrest, Royal Velvet and Cannon towels and sheets, said two weeks ago it plans to close two plants and eliminate nearly 800 jobs.

Mill closures in the South eastern US are nothing new, however.

A slowing economy and imports have hit South Carolina hard, where three companies recently announced mill closures along with another, run by WestPoint Stevens, in North Carolina.

Chemical giants, such as DuPont are feeling the pain, too. It announced last month it was cutting as many as 4,000 jobs in response to a weak US apparel market.

"US cotton producers, the marketing system and textile manufacturers are facing a major restructuring development to a much smaller and more efficient industry," says Carl Anderson, economist for Texas A&M University.

Analysts add the US will continue to face increased competition and reduced production as factories continue to move to low-cost producing nations such as Mexico as well as those in Southeast Asia.

Meanwhile, traders at the New York Mercantile Exchange see little hope that cotton and other textile prices will soon rise.

"There are just too many available cotton supplies in the world, poor demand, increasingly weak consumption and generally good weather conditions for the market to sustain itself," says Alan Field, broker at STA Trading Services in Memphis, Tennessee.

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01 Jun 01 | Business
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