The United States cotton yarn sector is often overlooked, and it’s easy to understand why. In 2012/13, U.S. mills spun only 3.6 million bales of cotton – the lowest total in over a century.
As recently as 1997/98, U.S. mills were spinning over 11 million bales on domestic soil. Unfortunately, Chinese mills then expanded their usage capacity, severely undercutting U.S. spinning mills and ultimately devastating the industry in America.
But in recent months the industry has quietly attracted a noteworthy amount in foreign investments, and U.S. cotton producers are one of the primary reasons why. Ultimately, those same producers could see a major benefit in the domestic revival of a downstream stop in cotton’s supply chain.
“One industry that was dead is slowly resurrecting,” said Joe Nicosia, executive vice president, Louis Dreyfus Commodities. “We are seeing a small resurgence in the U.S. textile industry.”
In 2013, companies from Mexico, China, India, Canada, Brazil, Great Britain, Japan, Switzerland and Korea announced plans to build or expand existing textile plants — all of which are located in Cotton Belt states. And aside from creating a new consumer of U.S. cotton, each investment brings with it the added bonus of new jobs.
In October, news broke that a Mumbai-based textile company would invest $70 million to build a manufacturing plant in South Georgia, creating some 250 jobs. Similarly, in December, Chinese firm Keer Group announced its intention to invest $218 million to open its first U.S. textile plant in Lancaster County, SC, creating another 500 jobs.
The locations of the new plants are no accident. Experts say proximity and access to raw cotton plays no small role in attracting investment and growth.
“(The new investment) is because we do have cheap energy and we have low interest rates,” Nicosia said. “The textile industry is becoming less labor intensive and more capital intensive. So we’re finding investments coming back here. And one of the other reasons why is because we have cotton, and we have a surplus of it.”
Industry analysts say another major reason for the resurgence in U.S. spinning investment is because of a Trans-Pacific Partnership trade stipulation known as the yarn-forward rule of origin that mandates that all materials in a garment must originate from a partner country to qualify for tariff-free entry into the United States.
Domestic firms are joining in the investment trend as well. In December, news broke that private equity firm American Securities, based out of North Carolina, would purchase Frontier Spinning Mills, the second largest spinner of cotton in the United States, and employer of over 1,000 spinning industry professionals.
While the future of Chinese demand for U.S. cotton is unclear, news of a resurgence in domestic spinning is a welcome sign for American producers.
Even with a spike in investment, however, industry experts do not expect a major increase in domestic spinning output in 2014/15. Nicosia said he believes domestic mills could account for four million bales in the next 12 to 18 months – a small but noteworthy increase over the previous year.