Share this on

Fabric sources react to China

Fierce competition, economic woes pose challenge

By Susan M. Andrews -- Furniture Today, December 29, 2002

'If you can't beat 'em...'
Huge variables

Business conditions for many fabric producers in the United States, still suffering under the dual burden of exploding imports and a limp economy, are pretty discouraging. Most producers don't expect to see better times before the second half of 2003, if then.

The bigger, stronger producers like Quaker have had money to spend on expansions and acquisitions. However, many of the smaller, niche players are struggling mightily to hang on, hoping the economy will improve and that upholstery manufacturers will lose patience with what domestic suppliers say is inadequate delivery and quality of imported goods.

Service and response time — or sufficient inventory — is the key to survival. The fabric producers who can deliver that best will survive, whether they are domestic sources or foreign.

It seems more than likely that some domestic mills will move production to China or other points offshore before year's end, either building their own plants or partnering with mills already in place. Some will go to make high-end fabric that can't be produced at home. Others will go east just to stay in business by producing their lines for much less than they can here.

Even the larger mills that have been able to merchandise their lines in ways that sustain their volume, and that are very responsive when their big-volume customers need product in a hurry, say they might be looking for real estate in China or other offshore locations in the coming year.

A bright spot is the potential fabric market in China itself. The fabric and furnishings market there should take off as the income level of the country's urban population continues to rise and preparations begin for the 2008 Olympic games.

"There is no question in my mind that more U.S. fabric producers will either move some production or source new product in China in the next year," said Roger Berkley, president of Weave Corp.

"The case goods industry has already pretty much flown the coop for cheaper shores," Berkley said. "Some of Weave's competitors will try to do what we are doing, i.e. make high-end product that it isn't practical or possible to make here. (Last year, Weave launched a division in China to produce high-end silk fabric.)

The big U.S. mills in the mainstream of the market will go to China take advantage of cost savings "if they go," added Berkley.

'If you can't beat 'em...'

Roger Gilmartin, executive vice president and chief operating officer at Covington Inds., said it's a given that more domestic production will shift to China. "I think some of them are bound to, because the playing field is so uneven for the domestic mills that at some point they'll reach the conclusion that 'if you can't beat 'em, you might as well join 'em,'" Gilmartin said.

Added Tim Dolan, president and chief executive officer of Global Textile Alliance, "Production will continue to move offshore, but imports will continue to come into the U.S. from the Far East, Europe, India, Turkey, Indonesia and other regions."

According to Dolan, the greatest strength of the U.S. mills is the intellectual property rights to their patterns. "It's not easy, but the U.S. producers have to police the industry themselves to protect their copyrights."

The next few years may be characterized by turmoil, as quotas and tariffs on textiles sold into China are eliminated. But some industry veterans think the barriers to product flowing into China may remain. They maintain that the system is too huge, ingrained and financially important to the Chinese for them to just walk away from it. These observers think the quotas and tariffs will continue under other names such as "extra processing fees," "special licensing fees" or "inspection fees."

On the question of what will happen when China is opened to free trade, Dolan acknowledges that "when the quota goes away, more fabric will be produced in the Far East and imported into the United States, but there may be a shift so that the cutting and sewing may come back to us."

Huge variables

At this writing, the United States has not commenced military action in Iraq, but war seems more a probability than a possibility, making even speculation about the coming year difficult.

"I can listen to all the conventional wisdom that says next year will be better," Gilmartin said, "but does it mean anything? I don't know what will happen next week, never mind next year. Will we go to war? Will people in this economic climate go out and start spending money on furniture? I don't know the answer to that."

Berkley agrees, calling the outlook for 2003 "extremely murky, what with Iraq looming large on the horizon and the potential for interruption of the flow of oil to the U.S. that might ensue on top of an already weak economy." Even if the conventional wisdom is right, and the economy starts to recover in the second half of 2003, a war would change everything.

Still, the U.S. housing industry continues to boom, which would seem to bode well for furniture, but the trend has yet to have much impact on furniture.

"My theory," Berkley said, "is that the record low mortgage rates combined with the deductibility of the interest has encouraged many people to buy that new house now. When it comes to furnishing the house, the credit card debt is still at high rates and is not deductible. So they move their old stuff and will decorate the new house as they can afford it.

"Of course, I have no clue if (this theory) is correct or not," he quipped, "but no one else has come up with anything better."

Whatever actually takes place for fabric producers in 2003, it's certain that the furniture market can count on more new fabrics and finishes from a community of suppliers locked in intense competition for a static market pie.

The jacquard lilies on Culp's Cassimia effectively cross categories, working as well for transitional upholstery as for the growing country and cottage looks.

Share this on

U.S. mills find ways to grow

Apr 27, 2008

Domestic Fabrics Gaining Ground

May 4, 2011

Fabric buyers still choose China

Sep 21, 2010

Showtime exhibitors still optimistic

Jun 1, 2008

Where will the industry be in 10 years?

Feb 26, 2006

Also by this author

Also by Susan Andrews

Featured Company

FurnitureCore.com

FurnitureCore.com is a dynamic web application aimed at the furniture industry. Retailers and manufacturers alike will find our deep reserve of tools to be exactly what their furniture business needs.www.furniturecore.com... more