1. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Overview of the Global Textile Industry Bangladesh Cotton & Textile Convention 2007 Dhaka, Bangladesh

2. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Topics To Be Considered … Global Trends The Trade/Sourcing Outlook Impact of China Market Requirements for Quality Cotton

3. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD When Viewing Topics, Keep in Mind... The worldwide textile industry is moving into a slow-growth period After years of explosive growth, the industry has matured China and the Indian Subcontinent have had a enormous impact on the global market for textiles

4. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD First, Let’s Establish a Baseline … Current forces affecting global textile and apparel trade –Aggregate production/consumption –International trading patterns –Tariff reductions under WTO –Free trade agreements

5. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD There’s been huge growth in worldwide textile consumption over the years … Source: ICAC, Wool Bureau, UN/FAO/Globecot Estimates Thousand Tons

6. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD … but the rate of growth is slowing Source: Globecot Calculations

7. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Worldwide cotton production is concentrated in a few regions … Based on Millions of 480-lb Bales 2004/5 Projected Production Source: USDA

8. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD … the same goes for worldwide polyester fiber production, too 2006 in Billion Pounds Source: FEB

9. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Asian mills consume the most fiber … Billion Pounds, Cotton, Synthetics, Wool 2006 Source: FEB

10. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD … with the U.S. playing a greater role as an exporter of cotton….and China playing a greater role as an importer of cotton

11. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Cotton yarn is mostly made in Asia … Source: ICAC; 2005/2006 forecast by ICAC

12. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD … the same is true in cotton fabric. Source: ICAC; 2005/2006 forecast by ICAC

13. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Asia buys the most textile equipment globally … Source: ITMF (Cumulative Weaving Machine Shipments 1990-1999)

14. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD The largest apparel importers are in the developed world … Source: UN (Imports in 2004)

15. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD … while the largest apparel exporters are in the developing world Source: UN (Exports in 2004)

16. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD The other side of the equation … The Impact of China

17. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Current State of the Chinese Industry Key factors affecting industry growth: –Internal advantages Low-cost labor Large raw material supply Huge export platform Growing domestic demand –External factors Foreign investment and technical know-how Expanding global market (for now)

18. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD $4.6 billion $10.5 billion $13.2 billion $18.56 billion $23.68 billion FAI in Textile Industry Sets the Stage for China’s Future Growth

19. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China Already has a Huge Share of Global Textile Capacity…and Rising

20. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Overview of China’s Textile Industry Production expanding, but varies by sector Fibers –Strong competition for cotton from polyester staple Yarns –New growth after industry rationalization Fabrics –Slowly improving quality, improved export sales Apparel and made-ups –Strong export growth drives production, but the future may be in the hands of Chinese consumers

21. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China: Spinning Capacity and Spun Yarn Output

22. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China: International Trade Summary Despite quotas in the U.S. and EU thru 2004 and more recent safeguards, China has rapidly expanded exports –But expansion comes after a period of flat export growth For imports, China remains a dominant importer of basic yarns and fabrics –In particular, China imports heavily from other Asian suppliers

23. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China imports more cotton yarn than it exports

24. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China:Domestic Apparel Consumption China: Domestic Apparel Consumption Although domestic demand is weak today, strong growth is forecast for the future –Urban apparel sales drive current domestic consumption –Rural consumers may take on greater role in the future If they do, apparel sales will skyrocket If they don’t, apparel sales will increase based primarily on the buying power of urban consumers –Home textile sales will also be important based on continued expansion of housing in rural areas

25. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China: Per Capita Annual Expenditure on Apparel/Accessories

26. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China: Outlook for the Future –Trade Growth in apparel exports will slow between 2010- 2015, in turn, impacting production Textile exports will increase through the end of the decade, but then decline Market saturation will begin to occur before the end of the decade and accelerate towards 2015 China will become an even larger importer of textiles – but also by 2015, China will be a major importer of finished apparel

27. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China Becomes Dominant Supplier of U.S. Apparel Imports

28. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD China Will Have Rapid Apparel/Made-Up Export Growth Thru 2010

29. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD But Will be Tempered by Rising Chinese Imports of Apparel, Replacing Domestic Output Over Time

30. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD So what do these changes mean for textile producers around the world? For one thing, textile mills will want to run better cotton. Why?

31. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Spinners Around The World Demand Better Quality Cotton … Competitive advantage Supply chain looks for it Options can be limited depending upon price and supply

32. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD So What Do Spinners Say About Cotton Quality?

33. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Cotton Board Survey Recently conducted by Globecot with more than 100 spinners around the world Survey results provide insight into those issues that will most likely affect current and future fiber processing requirements Also, survey results provide valuable insights for maintaining the export business

34. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Expansion of Asian textile industry necessitates high quality for cotton Longer staple length Better color, lower contamination Improved inspection procedures Better delivery Transparent business interactions

35. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Issues With U.S. Cotton Quality cited as an important deterrent to buying more U.S. cotton –Stickiness –Small problem has much wider influence

36. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Issues With U.S. Cotton Staple length can be an important deterrent to buying more U.S. cotton –U.S. Memphis/Eastern crop has historically moved to domestic mills –But with downsizing of domestic industry, growers forced to find new business off-shore –However …

37. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Issues With U.S. Cotton As overseas spinners have upgraded their equipment, they tend to run longer staple cotton –SLM 1-1/16” had been the standard –M 1-3/32” is the new standard –Most spinners overseas know relatively little about Memphis/Eastern –Had to sell at big discounts

38. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Survey Question: “What factors would prompt you to buy more U.S. cotton?” Improved quality: 62.12 % More familiarity with U.S. growths: 56.93 %

39. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Concluding Remarks Global shifts in textile production … driving shifts in cotton purchasing patterns Requires close attention to quality, price and varieties In the long run, U.S. cotton export sales will not just support global textile exports but rising domestic textile consumption in China and elsewhere

40. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Concluding Remarks China’s growth will be offset by declining consumption in the developed world Further changes to the global textile business will be affected by changing demographics –Age –Buying power

41. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Concluding Remarks China will only be a textile export juggernaut for a fixed period of time … perhaps 10 years, 15 years? In order to maintain market share, suppliers will be forced to evaluate their focus on quality versus quantity –Choice of production –Future viability at stake

42. BUSINESS INTELLIGENCE FOR AN INTERWOVEN WORLD Concluding Remarks Will new free trade agreements accelerate global shifts in the textile business? Biggest wildcard: How will China “The Consuming Nation” alter the global textile business?