-------
The various forms of man-made fiber textile materials' exports are also
shown in Table V-29. As shown, most man-made textile exports are either
cloth and fabric or man-made fiber manufactured products. In 1978, these
two forms represented 52.0 and 39.5 percent, respectively, of all man-made
textile material exports.
B. Price Determination
Segments within the textile industry are highly competitive with prices of
its output determined through the direct and indirect interaction of many
variables. Although textile demand has been strong during recent years,
certain segments have operated with excess supply capacity resulting in
lower capacity utilization rates generally ranging from 60 to 80 percent.
Furthermore, increasing levels of imports have added to the available
supplies of certain textile goods. These factors plus consumer attitudes
and spending habits influence prices received for textile goods.
In this section, the textile price determination process is described.
Included in the discussion are descriptions of the major price influencing
factors and historical trends in textile prices.
1. The Price Determination Process and Influencing Factors
The textile industry's pricing process, at one time, could be depicted as
the closest model of pure competition existing in the major manufacturing
industries in the U.S. However, during the past two to three decades, the
competitive environment has changed and accordingly the applicability of
pure competitive situations have been reduced I/.
While the available supply and market demand for specific textile goods are
major determinants of the price of the goods, numerous other factors have
considerable influence in the actual price received by the textile manu-
facturers. These are described below.
(1) Characteristics of the product: its seasonal, cyclical, and
secular demand; breadth of market, i.e., degree to which it is
multipurpose; nature of styling and operation where styled.
(2) Elasticity of supply: extent to which machinery can be trans-
ferred into and out of the market; policy of shift operation;
industry practice concerning goods in process and finished
inventories: are goods made to stock, on order only, or are
goods made and sold at the market almost regardless of price?
(3) Extent of producer specialization by produce and by market
level. Degree of inertia among producers and respect to
changes in product construction.
I/ Georgia Institute of Technology, Economic Analysis of Pretreatment
Standards for the Textile Industry, for the U.S. Environmental Pro-
tection Agency, July, 1977.
V-41
-------
Table V-29
Raw wool equivalent of U.S. exports of wool products,
1965-1973
Manufactured
rear
1965
1966
1967
1963
1969
1970
19/1
1972
1973
1974
1975
1976
1977
1973
TODS and
1 ,000
pounds
513
730
353
828
1,132
1,101
5,414
25,111
23,163
14,225
11,323
5,723
3,176
2,563
Yarns
percent
4.0
5.3
9.9
3.9
12.7
16.1
44.9
78.3
70.3
54.0
55.3
37.3
24.4
20.4
Fabrics
1 ,000
Products
1 ,000
pounds percent pounds
304 3.1
536 4.5
550 5.4
496 5.3
395 4.4
403 5.9
469 3.9
599 1.3
1,069 3.2
922 3.5
1,293 5.0
955 5.3
378 6.7
1,094 3.7
4,740
4,338
3,431
3,562
2,576
1,982
2,342
2,304
4,241
5,702
4,203
4,929
5,407
7,246
Raw cotton equivalent of
percent
30.3
34.5
39.7
33.1
30.1
28.?
19.4
3.4
12.7
21.7
19.7
32.5
41.5
57.7
J Wastes Caroets J Ruas
1 ,000
1,000
oounds percent pound
3,376
5,399
3,293
3,535
3,536
2,484
2,516
2,753
2,501
2,978
2.185
1,277
1,591
929
U.S. cotton exports
56.7 514
50.4 538
38.1 509
38.9 313
41.4 1 ,C04
36.3 331
21.7 1,205
3.3 1,065
7.3 1,984
11.3 2,504
10.2 1,380
3.4 2,261
12.2 1,986
7.4 733
, 1965-1978
s percent
3.
4.
5.
3.
11.
12.
10.
3.
5.
9.
8.
14.
15.
5.
9
5
9
3
3
9
0
2
9
3
8
9
2
3
"otal
1 ,000
pounds
15,552
12,591
3,o41
3,039
3,393
5,351
12,046
33,332
33,363
25,332
21 ,385
15,150
13,033
12,567
percent
100.0
100.0
100.0
100.0
100.0
100.0
100.0
iOO.O
100. 0
100.0
100.0
100.0
100.0
100.0
Manufactured
Yam
Year
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
Year
1965
1966
1967
1363
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1,000
pounds
7,104
6,518
5,737
4,442
37,432
15,180
16,245
17,375
15,372
17,926
11,953
12,150
10,150
20,340
Sliver
and
1,000
pounds
4,309
6,384
4,500
5,042
5,002
5,644
4,541
5,142
10,553
13,381
5,777
12,254
12,i:4
10,147
Thread and Twine
1,000
percent pounds
4.1
3.4
3.0
2.4
16.1
7.6
7.2
6.2
4.3
4.6
3.4
2.9
2.3
5.7
Man-made
, tops,
rovinn
3,069
3,352
3,148
3,218
3,014
2,562
2,964
4,043
5,293
5,087
5,038
5,313
6,733
11,527
percent
1.3
1.3
1.7
1.7
1.3
1.3
1.3
1.4
1.6
1.5
1.4
1.5
1.3
3.3
fiber equivalent of U.S.
Cloth
1,000
pounds
110,301
122,343
119,797
115,202
113,171
113,932
130,341
174,482
199,325
228,024
217,388
248,391
203,981
219.757
exports
percent
53.5
54.3
53.5
61.2
50.9
57.2
57.3
50.0
51.4
58.5
61.5
60.2
55.2
51.3
Cotton Products
1,000
pounds
53,258
56,313
59,717
65,338
73,446
57,512
76,251
94,044
104,707
137,381
119,270
146,235
148,598
135.980
percent
30.5
30.0
31.7
34.7
31.6
33.9
33.7
32.4
32.2
35.3
33.7
35.4
40.2
38.2
of man-made textile products,
"oral
1,000
pounds
173,732
189,526
188,399
188,200
232,063
199,186
226,311
290,444
325,197
389,418
353,554
413,154
369,462
355,7*5
percent
100.0
100.0
100.0
100.0
10C.O
100.0
100.0
100.0
100.0
100.0
100. 0
100.0
100.0
100.0
1S65-1978
Man-Made Fiber Man-
Yarn
1,000
percent pounds
3.7
4.5
3.4
3.9
4.1
3.3
3.1
2.9
3.7
3.4
2.1
3.5
3.3
2.3
2,315
2.009
2,606
3,412
5,969
6,171
5,349
7,479
23,459
34,222
20,934
24,666
27,39fi
27,559
percent
2.2
1.4
2.0
2.6
4.0
4.2
4.0
4.2
3.2
3.3
6.5
7.0
7.5
6.2
Cloth J
1,000
pounds
87,721
93,121
34,218
75,166
79,345
76,404
70,186
33,581
128,623
176,505
160,627
154,007
166,819
229,569
Fabric
percent
68.0
66.5
63.3
58.3
54.3
52.0
47.9
47.1
44.6
45.2
49.3
46.8
45.4
52.0
ufactured Products
1.000
pounds percent
33,711
38,462
41,654
45,374
54,914
53,333
66.101
81 ,232
125,587
166,526
134,050
150,249
160,737
174,423
26.1
27.5
31.3
35.2
37.6
40.0
45.0
45.3
43.5
42.5
41.5
42.7
43.3
39,5
Total
1,000
pounds
129,056
139,976
132,978
128,994
146,230
147,052
146,677
177,584
288,227
390,734
322,388
352,176
367,076
44j,7qg
percent
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Source: U.S. Department of Agriculture, Cotton and Wool Situation. February, 1979.
V-42
-------
(4) Degree of uniformity in the offerings of different producers.
(This is not so much a question of knowing what mills produce
the best or poorest qualities as the extent of variation vs.
homogeneity of products).
(5) Number and relative size of sellers in the market; extent and
character of price leadership.
(6) Procedures by which sellers claim to arrive at selling prices;
attention given to market information, probable action of
competitors, statistical appraisal of market prospects, own
costs, etc.
(7) Number and relative size of buyers in the market; extent and
character of their domination of the market; procedures by
which they claim to arrive at prices they will pay.
For most textile facilities, the initial basis for determining prices of
their products is the same as for most products; the manufacturer attempts
to recover his raw material and production costs plus a margin of profit.
With this information plus consideration of the market environment and
other influencing factors, the manufacturers usually either chooses a
simple formula in setting prices such as costs + overhead + fair profit =
price, or charges what the market will bear. In setting prices, manu-
facturers sometimes attempt to penetrate a market through low prices,
possibly sacrificing profits and selling at or below costs to attract a
following, or they may want to set prices extremely high in order to
establish it as a high quality, expensive item. For example, DuPont
charged the maximum amount possible for Qiana, a silk-like fabric, when
the product was initially introduced, in the hope that consumers would
associate the fabric with high fashion. To accomplish this, DuPont charged
high prices—SB.95 to $8.95 per pound compared with a market price of $8
to $10 per pound for silk. The appetite of lower-priced fashion markets
has now been whetted and the company plans to broaden its coverage by
dropping to the next lowest price category as promotion and production
costs continue to drop _!/. When analyzing the consumer, manufacturers must
determine whether the customer is willing to pay more to maintain or in-
crease quality or if he will sacrifice quality for quantity.
As will be presented in the next section, prices of textile goods have varied
during recent years with most, if not all, increasing when expressed in cur-
rent dollars (not adjusted for inflation). These price changes are a result
of various factors, the most common being changes in the prices or costs of
the various components comprising the finished product. As was shown in
Exhibit IV-1 (page IV-19), textile manufacturing represents just one of
many manufacturing steps involved in converting chemical or agricultural
I/ "Pricing Strategy in an Inflation Economy", Business Week. Reprinted
by Vernon, Ivan R. and Charles W. Lamb, Jr., ed. The Pricing Function,
Lexington, Mass.: Lexington Books, 1976, 43.
V-43
-------
products (fibers) into consumer textile goods available at retail stores.
To gain a perspective of the respective shares of the retail dollar of
textile goods, Edward H. Glade, Jr., estimated the distribution of the
consumers' retail dollar spent for cotton denim dungarees. In this estimate,
the costs of producing, ginning, marketing and processing raw cotton and
manufacturing and distributing cotton products were included in the dollar
spent, as were retail displaying and merchandising. This distribution is
presented in Table V-30. As shown, of the $8 retail value of a pair of
cotton denim dungarees in 1974, 6.4 percent of this price was associated
with the farm production of cotton, 2.0 percent was associated with ginning
and marketing to the textile mills, 19.6 percent was associated with the
textile mill processing and finishing, 30.0 percent was associated with
apparel manufacturing, and 42.0 percent was associated with wholesaling
and retailing.
2. Prices and Marketing Patterns
As a means of illustrating price trends and relationships, textile products
were grouped according to marketing patterns, as listed below. Fibers are
comprised of both plant fiber and animal hair produced on the farm, and
synthetic fibers produced primarily in the chemical industry.
(a) Fibers
(b) Yarn
(c) Fabrics
(d) Carpets
(e) Apparel
(f) Home furnishings
Yarn, fabrics and carpets are manufactured almost entirely within the
textile industry. Yarn is produced exclusively in the industry and con-
stitutes an intermediate product, while fabrics and carpets may be either
intermediate or final products. Apparel and home furnishings are final
products which may be produced within the industry or within other indus-
tries. In Table V-31, additional groupings are shown for each of the major
classifications. These major groupings include specific products to be
discussed below for which commodity prices can be identified.
In Chapter IV, the broad relationships between the major markets involved
were illustrated in Exhibit IV-1. More specific relationships are shown
in Exhibit V-l in this chapter in order to indicate at what point in the
production flow products may appear in each of the markets. These markets
show the relationships between mills falling within the classification
system of the industry as covered subsequently in the study.
As pointed out above, the fiber markets provide the raw material input to
the textile industry. This input includes not only cotton, wool and
synthetic staple and tow but also unprocessed filament yarns. In the pro-
duction flow, fiber may appear as processed yarn produced in the yarn mills
V-44
-------
Table V-30.
Cotton denim dungarees: estimated distribution of the retail
dollar by operation or service, 1974 I/
Operation or Service
Farm production
Ginning
Marketing to textile mills ....
Warehousing service*. .
Transportation
All other "
(Accumulated value at mill door) . .
Textile mill processing and
finishing •;
(Accumulated value after
textile mill)
Apparel manufacturing . ..
(Accumulated value alter
Wholesaling-retailing
Total value at retail
Cost per pound
of cotton1
Dollar*
366
061
052
( Ol 01
( 008)
( 014)
( 020)
(.479)
1.115
(1 594)
1 715
f3 3O91
2 390
5 599
Cost per pair
produced1
Dalian
.316
086
073
(0 14)
(Oil)
(.020)
(.028)
(.675)
1.572
12 2471
2 A 1 ft
/4 cc«%
3 370
3 035
Proportion of
retail dollar
noltart
G.4
1 i
0.9
/ n 2\
(0 1)
(0 3)
10 3)
(8.4)
19.6
(28 0)
30 0
[*o Ol
42 0
100 0
Estimate! were deveiooed from both puollsn-fl and
unpublished sources. Farm prooucdon, ginning, and marketing
cost! are U.S. Department of Agriculture data; textile mill
processing and apparel manufacturing estimates were adapted
fiom data from the Bureau of Laoor Statistics; and
Wholesaling-retailing margins estimated from private trade
sources. Complete methodology and data sources are available
on request. 'These data represent the estimated cost or value
added to 1-pouna of cotton at eacn stage from production
through retailing for cotton used in the manufacture of men's
cotton denim dungarees. "Costs per pair produced refects the
estimated cost or value added to a typical pair of denim
dungarees containing 1.41 pounas of cotton (2.256 sg. yds. x
.625 pounds per so., yd.) at each stage from production through
retailing. 'includes buying and selling expenses, cotton
Insurance, financing, and overhead expenses of marketing firms.
Source: Glade, Edward H., Jr. "Who Gets the Cotton Denim Dollar?"
wool Situation. USDA, March 1976, 30-32.
Cotton and
V-45
-------
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or it may be consumed in weaving, knitting or carpet mills and appear as
an intermediate or final product at any stage along the product flow.
For example, fiber is consumed in some cases by large integrated carpet
mills, however, carpets produced from the fiber will not appear in any
market prior to the floor covering market.
Within the fabric system, yarn from the processed yarn markets may be con-
sumed either by greige mills or integrated mills. If consumed by greige
mills, it may appear along the product flow in the greige fabric markets
where it will be an intermediate product to be consumed by the finishing
mills. However, it may also next appear on the finished fabric markets if
the fabric is processed through a commission mill. Another flow for the
yarn is through integrated mills in which it is milled into greige fabric
and then finished prior to entering the finished fabric market. A third
flow for the yarn is through a full integrated mill which not only mills
and finishes fabric but also fabricates final products, e.g. mills which
produce sheets. In this case, products from the yarn would not enter a
market prior to the textile home furnishing market. Fabric appearing on
the finished fabric market is a final product to the textile industry
exiting to the apparel or home furnishing industry.
The flow of yarn through the knit apparel and hosiery mills can be as
diverse as the flow involving woven fabric. The significant difference
is that the finished product appears as a final product on the apparel
market.
3. Raw Material Prices
Sources for price information vary considerably by type of product pro-
duced. USDA publishes detailed data on fiber prices including cotton, wool,
and man-made. BLS publishes monthly spot prices on textile mill products,
apparel, home furnishings and carpets in its Producer Price and Price Indexes.
However, these prices are obtained as a means of developing the price indexes
and are not intended to be used in developing specific price series. Hence,
from this data, only a few significant price seri.es can be developed. The
Daily News Records reports spot prices on yarn, cotton, cotton group goods,
and man-made group goods. A discussion of the prices provided from these
sources is contained below.
Wool (from USDA source). Prices for fine U.S. graded wool paralleled
Australian wool closely through 1972 with 3/8 blood fleece wool at a slight
quality differential. A 50 cent price gap opened between U.S. and Australian
fine wools in 1973 and has been maintained since that time. Wool prices
hit a low in 1971 resulting from heavy supplies but then cycled to all time
highs in 1973 resulting from shortages induced in 1971. Since that erratic
swing in the 1972-1973 cycle, however, prices have tended to be more stable
over the past few years, as shown in Table V-32.
V-48
-------
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V-49
-------
Cotton (from USDA sources). Cotton prices paid to farmers and cotton
prices on the market have fluctuated dramatically over the past decade.
Cotton suffered its greatest loss in its share of the market in 1968 when
a short supply in 1967 caused high prices, spurring many mills to shift
over to man-made fibers. This fluctuation was minor, though, when compared
to the period between 1972 and 1978 (Table V-32 and Exhibit V-2). Market
prices jumped from 35.6 cents in 1972 to 67.1 cents per pound in 1973 and
then fell to 41.2 cents in 1974. Prices began climbing again and reached
73.4 cents in 1976 and then fell to 50.8 cents in 1977, rising slightly to
52.7 percent in 1978. The differences in market prices and prices paid to
farmers were also erratic during the 1972 to 1973 period. Prior to 1970,
the difference between the two prices varied by only a couple of cents; in
1972 they widened to almost 5 cents. The gap continued widening until
1973, when the market price was almost 23 cents higher per pound than farmers
received. The market price fell in 1974, however, declining below the price
received by farmers. The market price fell below that received by farmers,
again, in 1978.
Man-made fibers (from USDA sources). Consumption of man-made fibers has
risen dramatically over the past decade. This growth corresponds with the
long-run trend of downward prices of man-made fibers. The man-made fiber
prices have fallen primarily due to greater efficiency within the industry.
Although prices for all synthetic fibers have declined since the Korean War,
the non-cellulosic fibers have fallen the most and cellulosic fibers the
least. Another characteristic of man-made fibers is the consistency of
prices throughout time and among producing companies, for all types of
material. The price is typically steady for long periods of time, usually,
when one company raises or lowers a price, the others follow. A third
characteristic of man-made fiber pricing is discounting. Although list
prices are known, market sales are often contracted at lower levels and
man-made fiber buyers receive trade discounts of five to 15 percent I/.
The main types of discounts offered include offering a percentage off for
volume purchases and arranging promotion sharing and other inducements.
Polyester fibers have declined dramatically in price, dropping from 86 cents
per pound in 1965 to 35 cents in 1972. Since that time, prices have in-
creased to 54 cents per pound in 1978 (Table V-33).
Rayon staple, which was priced lower than polyester in 1965, maintained
a constant price through 1971 while polyester declined dramatically. Since
1971, rayon has increased in price to slightly over that of polyester.
I/ Ward, Lionel E. Interfiber Competition with Emphasis on Cotton, un-
published Ph.D. dissertation, University of CalifornTa, Davis. Avail-
able through University Microfilm International 1962, p. 37 and Economic
Research Service, U.S. Textile Fiber Demand, USDA Bulletin Mo. 1500,
Washington D.C., September 1974, p. 22.
V-50
-------
Exhibit V-2. Selected Market Prices, January 23, 1978
COTTON GRAY GOODS
Spot
lxt. 2nd 3rd
(<>n.lru 96x68 taffeta ' . ... - 34
-\
FINISHED TRICOT
Nylon
108" 40 den. 6.00 sq. yd. dull ....." 39-40
108" 40-den. 6.00 sq. yd. semi-dull
- 41-42
108" 40 den. 6.00 sq. yd. multilobal . 49-50
54" 40 den. 6.00 lin. yd. dull PFP ... 59-60
54" 40 den 6 00 lin yd branded
multilobal PFP „...<.-. 64-66
Acetate -
KMT brushed HO/20 acetate/nylon.90-92Vi
54" brushed Iriacetate/nvlon HO/2O 1 65
60" acetate/nylon 65/35, 32-guage t~
unsueded, bright ( for printing 47"j
Triacetate
54" 60-den 3 00 yd. lin . for jjrmting . 60
The about price tablet art bated on mill salt* of average quality fabrics or
yam*. In the event of inactive numbers, price* are for the last reported sale*. The '-
symbol "X" befort a price indicate* tecond- hand tale*.
Source: Fairchild Publications, Daily News Record, January 23, 1978.
V-51
-------
Table V-33. Landed group B mill points: man-made staple fiber
prices at f.o.b. producing plants current dollars.
Year
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
Rayon-/
27
26
24
25
26
25
27
31
33
51
51
54
58
58
2/
Polyester—
85
80
62
56
45
41
37
35
37
46
48
53
56
54
I/ 1.5 and 3.0 denier, regular rayon staple.
2/ Reported average market price for 1.5 denier polyester staple
for cotton blending.
Source: Cotton Situation, November 1974 and Cotton and Wool Situation,
May 1978 and September 1974.
V-52
-------
Fiber price comparison. While individual fiber price movements are important,
these price changes become even more significant when one fiber is compared
with a substitute fiber. These price relationships are a key factor in
determining the type of fiber and type of blends that will be used in the
manufacturing process. Two basic price ratios are shown in Table V-34:
wool/polyester and cotton/polyester.
The wool/polyester price ratio has changed dramatically over the past with
wool becoming increasingly disadvantageous with respect to polyester. In
1965 the ratio was 1.4 to 1 but it increased steadily to 1971 with sharp
increases in 1972 to 3.4 to 1 and reached a peak of 6.8 to I in 1973. Since
that time the ratio has become somewhat more favorable to wool with a ratio
of 3.2 to 1 in 1972.
The cotton to polyester price ratio followed a similar pattern but not as
dramatic. Cotton had a distinct advantage in 1965 with a price ratio of 0.4
to 1. By 1971 the ratio changed to a 0.9 to 1 relationship as cotton prices
increased. In 1973, the rate hit a peak of 1.8 to 1 and has declined to 0.9
to 1 since that time.
The determinants of the demand for fibers, factors affecting fiber substitu-
tion, and interfiber competition have been studied by a variety of authors
(Blakeley, 1962; Ward, 1969; Barlowe and Donald, 1971; Evans, April and
September, 1977). In general, fiber demand is determined by price effects,
trend effects, and the relative stability of fiber supply. Both own-price
and cross-price I/ effects are important. Most writers have found signif-
icantly larger cross-price effects than own-price effects, especially for
cotton (Evans, September, 1977; Ward, 1969). Long term trends in relative
prices have been very significant, but fiber markets have not quickly
responded to short term changes in relative prices (Ward, 1969). While
quantitative analysis has usually demonstrated these price effects, virtually
all writers have maintained that trend variables are at least as important
as prices in the determination of fiber market shares (Ward, 1979; Barlowe
and Donald, 1971; Evans, April 1977; Ga. Tech, 1977). The term "trend"
groups effects from technological change, market inerta, tastes and
preferences, market promotion, and research. Technological developments,
most of which have favored non-cellulosic synthetics, include the discovery
of new uses, new products, and new materials; developments in blending,
weaving, and dyeing; technical and quality fabric characteristics; and
machinery capacities and speeds. Market inerta includes factors related to
the momentum of buying habits, the level of fiber consumption in previous
periods, types and capacities of installed machinery, the reluctance to
change fibers in current use, and the finality of a change in fiber mix once
that change is effected. Fashion, style, comfort, fabric performance char-
acteristics, advertising and market promotion, and research on new materials
and uses are also important. Finally, supply stability is a positive factor
II Cross-price effects refer to the effects on a product induced by changes
in the prices of that product's substitutes (competitors).
V-53
-------
Table 'V-34.
Price ratios of wool to polyester and cotton to
polyester, 1965-1977
Year
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
Wool
1.20
1.30
1.20
1.20
1.20
1.10
.70
1.20
2.50
1.80
1.50
1.80
1.80
Polyester
.85
.80
.62
.56
.45
.41
.37
.35
.37
.46
.48
.53
.56
Ratio
1.4:1
1.6:1
1.9:1
2.1:1
2.7:1
2.7:1
1.9:1
3.4:1
6.8:1
4.0:1
3.1:1
3.4:1
3.2:1
Cotton
.30
.23
.29
.24
.23
.24
.33
.36
.67
.41
.58
.73
.51
Polyester
.85
.80
.62
.56
.45
.41
.37
.35
.37
.46
.48
.53
.56
Ratio
.4:1
.3:1
.5:1
.4:1
.5:1
.6:1
.9:1
.1:1
1.8:1
.9:1
1.2:1
1.4:1
.9:1
Source: U.S. Department of Agriculture, Cotton and Wool Situation.
V-54
-------
for synthetics and against cotton (Ward, 1969; Ga. Tech, 1977). On several
occasions in recent years, the quantity of available cotton has fluctuated
sharply (for example, during 1966-67 and 1973-74), while man-made fibers
have remained available. This has produced price instability in cotton,
thereby curtailing some cotton fiber shipments. The instability of cotton
supplies has added impetus to the switch to man-made fibers I/.
In support of these contentions, Blakeley (1962) was able to show signif-
icant effects on the domestic consumption of cotton from both the domestic
production of man-made fibers and the lagged domestic mill consumption of
cotton 2/. These variables outweighed cotton fiber price in their respec-
tive effects on mill cotton consumption. Blakley estimated the own-price
elasticity of cotton fiber demand at -0.86, an estimate which he notes as
higher than that obtained by other researchers. Evans (September 1977)
found that the domestic mill consumption of cotton was significantly
associated with total domestic fiber consumption, cotton fiber prices,
and polyester staple fiber prices. The prices' terms carried the heaviest
weights in Evans1 equations, and polyester fiber prices had slightly
greater explanatory power than cotton fiber prices. Own (cotton fiber)
price elasticity was estimated at -0.25 to -0.35, and cross (cotton-
polyester fiber) price elasticity was estimated at 0.35 to 0.40. Using
price ratios, Evans was also able to show that a change in relative
prices favorable to polyester had a highly significant impact on the
domestic mill consumption of cotton fiber.
Ward (1969) generated numerous equations relating the consumption of
individual fibers to own and competing fiber prices, and to total domestic
fiber consumption. In general, Ward found that own and cross price effects
were highly significant in fiber market share determination through time.
In cotton, own-price was of less importance than competing man-made fiber
prices, especially non-cellulosics. In non-cellulosics, own-price effects
were relatively more important than cross price effects.
Ward generated numerous estimates of own and cross price elasticities of
fiber consumption. These were summarized in the table below (Ward, 1969,
p. 142).
V For a discussion of these considerations, see Barlowe and Donald
(1971); and Barlowe, Russell G., Analysis of Cotton and Man-made Fiber
Substitution in End-use Item Consumption in the United States, Un-
published Masters Thesis, 1967, University of Maryland.
2/ The influence of previous period consumption on present period consump-
tion is actually a measure of the structural momentum in the system.
V-55
-------
Approximate Direct and Cross-Elasticities Between
Raw Fiber Consumption and Fiber Prices
Fiber
Consumption
Cotton
Wool
Cellulosic
Non-cell ulosic
Raw Riber Prices
Cotton
0 to -0.1
0 to 0.2
0.2 to 0.4
0
Wool
0
-0.3 to -0.5
0
0
Cellulosic
0.4 to 0.6
0.4 to 0.7
-0.1 to -0.3
0
Non-cellulosic
0.2 to 0.4
0.6 to 1.0
0.3 to 0.6
-1.0 to -1.5
For cotton, all elasticities were relatively low, but cross-price effects
were more important than own-price effects _!/. For man-made non-eellulosics,
elasticities were moderate to greater-than-unity, with own-price effects
more important than cross-price effects.
Ward notes the great influence of the supply reliability, technology, and
inerta factors in the determination of fiber market shares, and partially
attributes the explanatory power of his total fiber consumption variables
to such considerations. Ward and the other authors also note that short
term responses to changes in relative prices are apparently small, but that
such changes have major significance in the longer term.
This analysis generated four functions relating to the competition for market
share between cotton and non-cellulosic fibers. Findings, shown on Table
V-35, generally support the discussion of findings by earlier writers.
Equations 5 and 6 relate the 1965-1977 total textile market shares of cotton
fiber and non-cellulosic fibers to the prices of the two fibers during those
years. The two equations account for 94 to 96 percent of the variation in
market shares during the years observed. Fiber share elasticities 2/ for
cotton (Equation 5) are estimated as follows: own-price, -0.29 and cross-
price (cotton share non-cellulosic price) 0.37. For non-cellulosics
(Equation 6) the elasticities are estimated as: own-price, -0.46 and cross-
price (non-cellulosic share-cotton price) 0.46.
Equations 7 and 8 relate the 1965-1977 market shares of cotton and non-
cellulosic fibers in home furnishing end-uses to the prices of the two
fibers during those years. The two equations account for about 94 percent
of the variation in home furnishing end-use fiber market shares during the
years observed. Market share elasticities for the two fibers in their home
I/ Many post-war researchers have estimated the own-price elasticity of
cotton fiber in a range between -0.1 and -0.4.
2_/ See footnote, p. V-35.
V-56
-------
Table V-35. Functional relationships in interfiber competition
Equation 5. Title: Cotton fiber snare of U.S. textile products as a function of cotton fiber price and lagged non-cellulosic
fiber price
dependent variable : cotton fiber share. Observed mean: 376.53846
independent variable : cotton price. Observed mean: 47.15384
independent variable : lagged non cellulosic price. Observed mean: 57.92307
lagged
Equation 5. cotton fiber share cotton price non-cellulosic price
R2=.959 376.53846 = 347.33157 - 2.30466 (47.15384) + 2.38041 (57.92307)
t for Ho: parameter = 0 : 6.55 -6.41
probability of a greater t by chance : .0001 .0001
F for ind. var. SS : 118.73 41.08
probability of a greater F by chance : .0001 .0001
Equation 6. Title: Non-cellulosic fiber share of U.S. textile products as a function of cotton fiber price and lagged non-
cellulosic fiber price
dependent variable
independent variable
independent variable
non-cellulosic sfrare. Observed mean: 458.84615
cotton price. Observed mean: 47.15384
lagged non-cellulosic price. Observed mean: 57.92307
lagged
Equation 6. non-cellulosic share cotton price non-cellulosic price
R2*.941 458.84615 = 462.27596 + 4.43801 (47.15384) -3.67209 (57.92307)
t for Ho: parameter » 0 : 6.55 -6.41
probability of a greater t by chance : .0001 .0001
F for ind. var. SS : 118.73 41.08
probability of a greater F by chance : .0001 .0001
Equation 7. Title: Cotton fiber share of total fiber use in home furnishings as a function of cotton fiber price and
lagged non-cellulosic fiber price
dependent variable
independent variable
independent variable
cotton fiber/home furnishings. Observed mean: 36.83846
cotton price. Observed mean: 47.15384
lagged non-cellulosic price. Observed mean: 57.92307
cotton fiber/ lagged
Equation 7. home furnishings cotton price non-cellulosic price
R2=.946 36.83846 « 38.47239 -.32647 (47.15384) + .23757 (57.92307)
t for Ho: parameter = 0 : -7.32 6.29
probability of a greater t by chance : .0001 .0001
F for ind. .var. SS : 136.92 39.60
probability of a greater F by chance : .0001 .0001
Equation 8. Title: Non-cellulosic fiber share of total fiber use in home furnishings as a function of cotton fiber price and
lagged non-cellulosic fiber price
dependent variable : non-cellulosic/home furnishing. Observed mean: 48.71538
independent variable : cotton price. Observed mean: 47.15384
independent variable : lagged non-cellulosic price. Observed mean: 57.92307
non-cellulosic/ , lagged
Eguation 8. home furnishings cotton price non-cellulosic price
R^=.937 48.71538= 48.26342 + .52468 (47.15384) -.41933 (57.92307)
t for Ho: parameter = 0 : 6.44 -6.08
probability of a greater t by chance : .0001 .0001
F for ind. var. SS : 112.12 36.98
probability of a greater F by chance : .0001 .0001
Source: Development Planning and Research Associates, Inc.
V-57
-------
furnishing end-uses are estimated as follows: for cotton (Equation 7), own-
price, -0.42 and cross-price (cotton share non-cellulosic price), 0.37. For
non-cellulosics, the elasticity estimates are: own-price, -0.50 and cross-
price (non-cellulosic share-cotton price) 0.51. Standard errors associated
with the regression parameter in all four equations ranged between 12 and
16 percent of those parameters. Again, the statistical results require
interpretative care and comparison with the results of other researchers.
The results generally support those of the other works cited.
4. Price Indexes
BLS publishes two types of indexes, industry and producer price (formerly
wholesale price index), which are applicable to a study of prices within
the textile industry. The industry indexes provide indexes on the output
of SIC industries at the 4 digit level and product classes at the 5 digit
level. While these indexes cover information which could be very valuable
in an analysis of the industry, the series are relatively new and provide
very little data prior to 1975. Consequently, these indexes are excluded
from further consideration in this study.
The Producer Price Indexes (PPI) provide a measure of price movements at
several levels. First it provides an index of prices at the aggregate in-
dustry level - Textile Products and Apparel, then it provides indexes of
the major classifications and groupings discussed previously. Finally, it
gives price indexes for a number of specific commodities.
Textile products underwent a significant reclassificaticm in 1976 in order
to reflect the decline in importance of wool products to the textile indus-
try and the increase in importance of synthetic and knit products. Prior
to the reclassification, textile products had been grouped according to type
of fiber. For example, the synthetic wholesale price index components
included unprocessed and processed yarn, fibers, and fabrics. With the
reclassification, textile products are now grouped largely according to
current marketing patterns. This reclassification should facilitate analysis
of prices in terms of production flows. A comparison of the groupings under
the two systems is shown below.
WPI, Textile Products and Apparel
Prior to 1976 1976
Cotton products Synthetic fibers
Wool products Processed yarns and thread
Synthetic Grey fabrics
Apparel Finished fabrics
Apparel
V-58
-------
The Textile Products and Apparel PPI reflect changes in both textile products
and apparel. Changes in the index are weighted such that about 46 percent
of the change is attributable to changes in textile products while 54 per-
cent is attributable to apparel. Within textile products weight of each
component are listed below:
Synthetic fiber 14%
Processed yarn and thread 21
Grey fabric 23
Finished fabric 44
The price movements between all commodities, and textile products and
apparel are compared in Table V-36. During the past 10 years (except for
1975), textiles have lagged behind all commodities. Prior to 1972, the
lag was minor with textiles increasing at an average rate of 2.6 percent
per year while all commodities increased 3.6 percent. Since 1972, textiles
have increased appreciably less with annual increases averaging 6.4 percent
against 10.4 percent for all commodities. Partial explanation of this
difference lies in the changes in the weighting system applied to textiles.
Prior to 1975, a large part of the increase in the producer's index was
due to acceleration of prices in cotton textiles. However, with the re-
classification in 1976, a greater weight to movements in prices of synthetics
and knit fabric tended to depress the overall index.
Price indexes of the products of the major textile markets are also shown
in Table V-36. Apparel products, which includes clothing and hosiery, in-
creased at a rate slightly higher than the composite textile and apparel
index through 1972. Since then it has lagged, in 1976 it was about 10
points less. This difference points out that the prices of fabrics have
actually increased faster than apparel.
Textile home furnishing prices have increased significantly higher than
both the composite index and the apparel index over tHe past few years.
This is due primarily to a large increase in 1974 when prices in home
furnishings increased over 25 percent contrasted to an increase of less
than 10 percent in the apparel prices. The price indexes of carpets has
substantially lagged the other products over the past 10 years. Except for
1973, price increases for carpet have been considerably less than 10 per-
cent. Hosiery, which is a component of the apparel index, has actually
decreased over the past ten years. Hosiery is shown separately here because
it is delineated from the other fabrics in a subsequent part of this study.
Inputs to the textile market system include wool, cotton, and synthetic
fibers. Synthetic fibers consist of unprocessed filament yarn as well as
staple and tow. A comparison of the fiber indexes is also shown in Table
V-36. The index for natural fibers climbed to over 200 (twice that of 1967)
in 1976. Among cotton and wool, the indexes have fluctuated considerably
throughout the period. All of the fibers reach indexes of about 200 in
1973 and dropped off drastically in 1975 rising in 1976. Domestic wool
V-59
-------
Table V-36. Producer orica indexes - fabrics
(cotton, wool, synthetics)
Grey Woven Fabrics
Broad woven
Cotton (Old)
(New)
Synthetic
Jute 4 burlao
Grey Knits
Knits
Synthetics
Finished Fabrics
Broad woven
Cotton (Old)
(New)
Synthetic (Old)
(New)
Knits
Cotton
Synthetics
Nylon tricot
Acetate tricot
Code
0337
031202
033701
033703
033704
0338
033803
0342
034201
034203
0343
034301
034503
03430341
03430351
1967
100.0
100.0
100.0
100.0
100.0
100.0
1968
102.3
97.3
104.0
111.1
92.1
107.2
1959 1970 1971
103.7 104.4 110.5
106.5 107.6 124.3
104.0 107.6 110. S
115.1 104.3 101.5
39.3 81.2 38.0
102.9 96.4 100.6
1972
124.1
142.0
120.5
116.9
90.7
87.7
1973
145.
133.
143.
1,145.
94.
90.
7
0
5
5
2
9
1974
*
173.5
*
*
181.3
A
*
it
173.1
*
161.7
it
it
it
ir
128.3
126.7
1975
100.0
177.9
100.0
100.0
137.7
100.0
100.0
100.0
173.2
100.0
140.6
100.0
100.0
100.0
100.0
112.3
131.7
1976
106.2
NA
103.3
106.0
110.1
104.1
75.0
105.4
NA
109.0
NA
101.3
96.2
110.7
95.1
110.0
127.3
1977
104.6
NA
112.6
101.1
112.5
107.4
79.7
110.3
NA
120.3
NA
99.7
95.5
118.4
93.8
119.4
130.3
Plant and Animal Fiber
Fiber
Raw Cotton
Domestic aoparel
wool
Foreign wool
Synthetic Fibers
Unorocassed fil-
ament yarn
Cellulosic
Non-cell ulosic
Staple
Tow
Textile Markets
015
0151
0152
0153
031
0315
031501
031502
0316
0317
Textile product and apparel
Apparel
Home furnishings
(sheets and pillows)
Carpets
Hosiery
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
104.6
107.2
102.9
105. 5
101.3
100.0
103.7
103.6
104.2
100.7
98.7
93.1 90.2 92.3
97.6
59.2
84.3
102.3 102.5 105.2
100.0 100.0 100.0
106.0 107.1 109.0
107.4 110.3 113.6
100.3 103.5 104.9
99.0 96.5 96.1
NA NA 97 . 7
117.5
107.7
100.0
113.6
114.8
109.2
101.0
97.7
197,
193.
194.
237.
109.
99.
123.
119.
113.
110.
98.
8
1
9
0
9
9
3
0
3
9
0
193.9
199.3
139.3
191.8
*
*
119.4
102.3
*
it
139.1
129.5
143.3
114.6
100.0
153.1
155.2
109.4
165.1
100.0
100.0
130.5
103.2
100.0
100.0
137.9
133.4
151.9
117.9
91.2
223.9
234.1
139.9
202.6
102.4
103.1
139.7
105.9
101.5
98.3
148.2
139.9
159.3
NA
107.5
107.3
108.9
139.6
113.5
104.5
106.2
154.0
147.3
171.3
NA
NA
* Astericks indicate those series begun in 1976.
Source: Bureau of Labor Statistics, Wholesale Price Indexes.
V-60
-------
reflects the lowest index at less than 140 in 1976. While the natural
fibers nearly doubled since 1967, the synthetic fibers have remained
relatively stable. A composite index of synthetics was not developed until
the 1976 reclassification; consequently synthetic price movements cannot
be compared directly with the natural fibers. However, the two unprocessed
filament yarn indexes (cellulosic and non-cellulosic) reveal the relative
stability of the synthetic prices. The cellulosic yarn rose to about 140
by 1976 while the non-cellulosic has remained stable, rising to less than 120.
The indexes of fabric prices are shown in Table 36. Again, the indexes for
the major groupings were not developed until the reclassification in 1976.
Consequently movement of prices for gray and finished fabrics cannot be
effectively analyzed.
Indexes are available for grey and finished cotton broad woven fabrics
and finished wool. The grey cotton broad woven fabric index increased to
about 180 by 1975 and leveled off for the next 2 years (actually decreasing
slightly in 1977). Finished cotton fabric moved with the grey fabrics until
1976. In 1976, the index increased to 120.3 (1975 base) contrasted to an
index of 105.6 for grey cotton fabrics. Wool finished fabrics is the only
fabric with a complete series (other than burlap and jute). Its index had
advanced to 140.7 by 1977, dropping slightly during the 1975 recession.
V-61
-------
Exhibit V-2. Selected Market Prices, October 18, 1979
COTTON GRAY GOODS
Spot,- .
4th. let. 2nd
Construction Qtr. Qtr. Qtr.
- WIDE PRINT CLOTHS
v
60 60x48 3.93 — 56V, —
51 64x56 4.20 5.'t53'/«-53 ..—
48 78x76 3.50 166 67 ,—
48 78x54 3.95 x52» — 52
4H B4xft« 4.45 50 50 —
48 60x48 5.35 43% 43 —
45 60x48 5JS5 41 41 41
BLENDED PRINT CLOTHS
Polyeater-Cotton
OSNABURGS
57 32x26 3.10 — — —
40 40x26 2.11 70 70. _—
Broken Twil^a . • :
58 72x56 1.06 "— =- —
' " .-_' '
-~* .. ' . \
S.F. APPAREL DUCK
47 * 84x28 1.87 —
-
DRAPERY SAILCbOTH
52 96x36 1.58 J1.06 $1.05 $1.05
48 IOUx.'16 1.88 93 86 85
' ~" '
DRILLS -
64 78x54 2.99 70 70 — 59 68x40 1.85 — 88 —
48 78x54 4.00 x46 46 —'59 68x40 2.25' "=— 80 - —
48 96x56 3.50 54 54 — 45 ' 72x48 1.95 — '. — —
Polvester-Rnvona
48 78x56 3.90 x45V» 46 —
65-35 Blends
Voile
47 .60x56 42 42 —
Batiste ~'
47 96x72 - 57 57 —
_, Broadcloth
47 128*72 82 80 80
.
, SHEETINGS
50 ' 44x40 4.40 ' 42 ' 42 " —
58 48x44 1.40 ~ »1.12 J1.12
COTTON
* , COTTON
N.Y. FUTURES MARKET
OCTOBER 18 M7»
Open Clove Prev.
December 65.8Ot 65.101 65.701
March 66.20t 65.70t 66.15t
May 67.201 66.851 67.101.
July 68.30b 67.801 68.25t
October 68.75b 68.75b 69.006
December 69.60t 69.50b 69.50b
March 70.50b 70.65b "O.SOb
t-tradsd b-bid o-offered
48 72x60 1.64 — — —
t • .
Industrial Duck
Army tl.38 on 37 in.. 13-ot. -
First column represent* the uiidth of
cloth, second column the count per
square inert, third column is the weight
in yards per pound. The fourth column
IM the spot price (immediate delivery}
fifth column and sixth column* usually
give the succeeding quarters for which_
delivery is quoted.
' • > • ^v '
MAN-MADE
FIBERS
Cellulosic Fibers
Rayon Staple < *— 70
High modulus staple . .. . ... 75
IJiO-dnn. irrljlLt. _,. -.„„„ ,„-„,'„ 101
55 den. acetate 1.15-1.20
Non-Cellulosic Fiber*
Poly blend staple _.„_ ___. 64-66
150-den. polyester feeder... 72-75
40-den, nylon, dull/beams... 1.85-1.90
.i den. acrylic staple , _ . , 62-64
COTTON YARNS
NEW YORK PRICES
Count
COMBED YARNS
Singles Plied
16s
18s
20s._ _.
24s _.
JOs
1.56-1.58
1.58-1.60
1.60-1.62
1.65-1.68
1.70-1.73
1.94-1.96
1.66-1.68
1.6U-I.70
1.70-1.72
1.77-1 JO
1.8S-I.88
2.09-2.12
POLYESTER/COMBED
COTTON 50/50*
18 singles r. 1.42-1.45
30 singles T.ofM.60
36 singles ; 1.80-1.82
Count
10s „ „„
14s _
18s „
20s
24s..:
.JOs
JOs poly-blend...
CARDED YARNS
Single*
1.24-1.26
1.26-1.28
1.32-1.34
1.37-1.39
1.43-1.45-
1.53-1.55
1.47-1.50
Plied
l'Jo-1.38
1.38-1.40
1.44-1.46
1.50-1.52
1.56-1.58
1.66-1.68
OPEN-END YARNS
All-cotton 10s 1 1.10-1.12
All-cotton. 18s 1.20-1.24
Poly-cotton 18^. 1.22-1.24
MAN MADE GRAY GOODS
October 18, 1979
Fl LAMENT FABRICS .
(Acetate Taffeta)
45W 92x56 • - , -i. 54
tt 92x62 .... 57V4
Acetate Lining . • " .
4.V; l2UxliM - x70 -66W /'•
Rayon Lining ,
• SPUN YARN GOODS
83;84
Rayon Challis
48 68x56 3.20yd.
48 68x56 3.20yd. HWM 62-64
Mohair-EfTecta ^
Acetate- Rayon
45*- 104x40 . • ' .. .,,.58-57
Polyeater-rayon "
46 84x34 - ' -'-• - i : JB-54
NYLON GRAY GOODS
• x70-72 60
49V, 96x68tafreta i62 56
FINISHED TRICOT - "
Nylon
108" 40 den. 6.00 sq. yd. full ........... -. 51-54
108" 40 den. 6.00 sq. yd. semi-dull..... 52-55
IOH" 4O den. (i.ml «i( yd, brJKhl,
unhrandvd .......... -......:. ________ '. __ .' __ S4-57
IOH". 4O-«lcn.. (H»>s<|. yil. liri|>hl. hrxiuliil
....... __ ......... _..; ..... _____ L ...... ____________ lift-la).
1IIH" 4II/JK tin', vil. lin».hr-l.'^5
54" trm.-elatf/nylon HD/2IX velour. Raugr.
while ________ ^ ..... !.„.-.: _______ .:._•„„ 1.75- I.WI
54" acetate/nylon 80/20 vefour... I.2S-I..W
SO." triaceUtc/nylon 65/35 boucle 1.85-
1.95 <• -. -.--.-.—
6O" aceUte/nylnn 65/35 terry — 1.65-1.70
60" acetate/nylon 65/35. 32 gauge urn
. lirixhl. for print in* ._ ....... --------- M
The above price tables are based on mill sales of average quality fabrics of yarns.
•'Ill the event of inactive numbers, prices are for the last reported tales. The
•ymooj "X" before a price indicalet second-hand salts.
Source: Fairchild Publications, Daily News Record, October 18, 1979.
V-62
-------
VI. REPRESENTATIVE MODEL PLANTS
Over 1,100 individual textile mills are engaged in manufacturing processes
which, in one form or another, generate wastewaters and thus fall within the
scope of this analysis and would be subject to effluent control guidelines.
Approximately 80 percent of these existing mills are discharging wastewater
into publicly owned treatment works (POTW's) and are classified as indirect
dischargers; the remaining 20 percent are discharging directly into receiving
waters (rivers and lakes) and are classified as direct dischargers. Model
plants representing both type dischargers were developed from a synthesis
of data obtained from surveys of the industry as well as published sources.
The model plants were based on the economic conditions in the industry during
1977 which were considered "baseline" in the analysis. The treatment systems
in-place in the industry during 1977 varied considerably.
In the model plant development, it was assumed that the direct dischargers
(except as noted below) have met BPT requirements while the indirect dis-
chargers have not had any treatment systems installed. In addition to model
plants representing existing mills or sources, models were developed to repre-
sent new sources (mills to be constructed in the future). As in the case of
the existing mills, new source models were developed both for direct and in-
direct dischargers. In order to facilitate the analysis in this chapter, model
plant data are organized under four classifications.
(1) existing direct dischargers,
(2) existing indirect dischargers,
(3) new source direct dischargers,
(4) new source indirect dischargers.
A. Model Plant Development
Model plants were developed primarily from data accumulated from two sur-
veys of the industry. The initial survey was technical in nature and was
conducted during preparation of the Development Document. The survey was
designed to develop a descriptive and representative data base covering:
(1) number and location of facilities,
(2) production levels,
3) wastewater discharge quantities,
4) methods of discharge,
5) general treatment status.
From this data base, the industry was divided into subcategories (and sub-
divisions) discussed in Chapter III. A range of mill sizes both in terms
of production levels and flow rates was identified. Eight flow rates were
VI-1
-------
selected as a means of establishing production levels for representative
model plants. These flow rates varied from a low of 0.05 mgd to a high of
5.0 mgd as shown in Table VI-1 and were established as the capacity levels.
These levels were then converted to specific production rates (kkg per day)
for each of the models within the subcategories. These rates provided the
basis for preparing the required control costs and for constructing the
model plants.
As a part of this study, a second survey was conducted involvino a random
sample of about a quarter of the wet processors in the industry and covered
questions on production, finance and wastewater discharge. The survey
responses revealed that additional segmentation within the industry was
required in order to reflect the economic characteristics; of different type
mills in terms of product ownership and degree of integration. Consequently,
in addition to categorization by type processing, mills were further categorized
by type of mills to include (1) integrated, (2) commission, and (3) own fabric
finishers.
Responses to the survey provided the data base from which the financial pro-
files of the individual model plants were constructed. Model plants were
developed for the capacities shown in Table VI-1. One or more models were
developed for most of the size categories (i.e., commission, integrated)
in order to represent the various type mills. Some of the capacity levels
established in the Development Document were not utilized as indicated by
"X" in the table since it was found that the subcategories; could be adequately
covered with a fewer number. For example, the survey indicated that the
number of simple processors in woven fabric finishing (4A) was not signi-
ficant in the larger categories. Consequently, model plants were developed
for the smallest capacities, only. Similarly, no mills were identified in
the larger sizes in knit fabric (5); model plants were not developed for
these capacities.
As indicated above, each subcategory was represented by one or more type
mills. This representation became a problem in the woven and knit fabric sub-
categories (5) in which mills were categorized by both type processing and
type mills as well as by sizes. Over 50 combinations were possible in the
woven fabric subcategory (4). Consequently, to reduce the number of model
plants to a manageable level, the structure shown in Table VI-2 was selected
for these two subcategories. This structure is believed to be descriptive
of the more common combinations in each subcategory. Simple processing
was generally limited to the small size categories while desizing was
restricted to the integrated mills (woven fabric (4)). With the estab-
lishment of the structures of each subcategory, model plants were then
developed which consisted of pro forma income statements and investment
characteristics. The models were developed to represent actual mills in
the industry by estimating a number of key parameters to include annual
production, sales, profit, capital investment (book value) and liquidation
value (salvage value).
VI-2
-------
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VI-4
-------
The production level of each model was computed as the product of the annual
capacity (in pounds of product) and the utilization rate. The utilization
rates were based on the surveys and varied between subcategories and type
mills.
After the production level was established, the sales volume was then deter-
mined by multiplying the dollars per pound of production by its annual pro-
duction. The dollars per pound were estimated based on an average of the
"typical" values of the surveys corresponding to the model category. Values
which were extremely high or low relative to the majority of the values were
generally excluded from the averaging. The values used represent a composite
of a variety of product mixes and consequently can not be identified with any
specific textile product. For example, the woven fabric subcategory (4)
reflects mills of which 48 percent were producing woven fabric only, 13
percent producing narrow fabrics, and the remainder processing a variety of
mixes such as fabric and yarn, and fabric and sheeting. In the knit fabric
subcategory (5), 28 percent of the mills surveyed were producing circular
fabric only, 17 percent were producing warp and the remainder were producing
mixes of fabric and apparel (underwear).
Levels of profits were determined for each model plant by averaging the returns
on sales from the survey data appropriate to its size and type category. As
was discussed above, the "typical" value was sought by excluding exceptionally
high or low values from the computation. These averages were then compared
with data contained in other published sources in order to establish their
reasonableness. If the project levels differed widely from the data reported
in the published sources, an investigation was made to determine the reason
for the difference. When it was considered appropriate, returns on sales
were modified to fall within the framework of these sources. The most valuable
published data source proved to be Robert Morris Associates, Annual Statement
Studies which reports data for mills organized within a structure similar to the
one utilized in this study. With sales level and profit level established for
each model plant, an appropriate cost structure was developed including depre-
ciation and interest. The sales level, cost structure and profits comprised
the pro forma income statement.
The capital investment for each model plant was derived by calculating the
difference between the total assets and current liabilities (this equals net
working capital plus fixed assets) for each surveyed mill. These values,
expressed as percentages of sales, were then analyzed to arrive at a typical
value for the model plant as discussed above. The asset structures of the
surveyed mills were analyzed and a breakout of net working capital and
current and fixed assets was determined for each of the model plants.
The final parameter to be derived was the salvage or liquidation value of
the model plant which is the sum of the net working capital (computed
previously) and the salvage value of the fixed assets. The salvage value
was established by an analysis of the estimates provided in the survey.
This was a key parameter used in the model plant NPV analysis. An over
estimation of the value would tend to overstate the impacts in the analysis
VI-5
-------
while an underestimation of the salvage value would understate the magnitude
of the impacts. A detailed discussion of the characteristics of the indi-
vidual models is contained below.
B. Model Plant Characteristics
The textile mills vary by operational and financial characteristics; thus,
the models will not accurately depict the characteristics of any existing
mill. However, since the subcategories discussed above group the mills into
segments having similar processes, discharge methods, and economic character-
istics, it was possible to develop models which are descriptive of the common
operational and financial characteristics.
The various models utilized in this report are shown in Table VI-3 for the
existing direct dischargers, Table VI-4 for the existing indirect dischargers,
and Table VI-5 for both direct and indirect discharge new source models. These
models incorporate the capacities shown in Table VI-1 for the subcategories and
subdivisions. As indicated above, model plants were developed for three types
of mills to include commission, own fabric (yarn, hosiery), and integrated.
These mill types represent mills within the industry with respect to product
ownership and extent of integration of milling processes. The "commission"
models represent those mills which are engaged in finishing only, but do the
finishing on a commission basis; they do not own the products which they pro-
cess. The "own fabric" models represent those mills which are also engaged in
finishing only; however, these mills actually purchase the textile materials
processed. The integrated models represent those mills engaged in both greige
milling and finishing operations. Models were developed for each of the above
type mills because of the significant differences in the financial profile of
these mills in the industry.
Tables VI-3 to VI-5 show the types of models used in each of the subcategories,.
Although the economic characteristics of these type models differ significantly
within subcategories, the waste characteristics and control technologies are
assumed to be identical for those models having the same production capacities.
Consequently, the type of model should be disregarded when relating the
models in this report with those in the Development Document. Within a
given subcategory and for a specific capacity level, the control technology
and costs contained in the Development Document are applicable to each of the
type models (commission,own fabric, and integrated). The subdivisions
(simple processing, complex processing and complex processing plus desizing)
are not identified in Tables VI-3 to VI-5. These are identified as appropriate
in subsequent tables. The hosiery products subdivision of knit fabric finishing
is shown separate from the simple and complex processing subdivisions since
the hosiery mills constitute a distinct and separate industry from an econ-
omic perspective. To facilitate the correlation of model plants developed in
this report with the subcategorization discussed in the Development Document
(Table VI-1), the subcategory numbers and subdivision letters will be placed
in parenthesis after each model plant discussed in the text.
VI-6
-------
Table VI-3. Textile industry, representative existing direct
model plants' capacities
Subcategory
1.
2.
4.
5.
5c
6.
7.
8.
9.
Wool scouring
Wool finishing
Woven fabric
finishing
Knit fabric
finishing
. Hosiery ,
products-^/
Carpet finishing
Stock & yarn
finishing
Nonwoven manu-
facturing
Felted fabric
processing
Type
mill
Commission
Commission
Integrated
Commission
Own fabric
Integrated
Commission
Integrated
Own hosiery
Integrated
Integrated
Commission
Own yarn
Integrated
Capaci ty
Small
16
.2
Medi urn
35
kg per
.6
Large X-Large
day-
80.
9
8.0
8
5
5
5
—
2
2
20
9
9
9
.0
.3
.3
.3
.7
.7
.0
.4
.4
.4
20
26
26
20
7
7
6
6
49
23
23
-
.0
.0
.0
.0
7 '
.7 I/
.0
.0
.0
.0
.0
40.
130.
130.
50.
18.
18.
™
120.
57.
38.
38.
0
0
0
0 220.0
6
6
0
0
0 57.0
0
10.4
-
2.0
-
]_/ Two model plants were developed in the medium category for both the
commission and integrated mills to cover simple and complex process-
ing.
- Subdivision of the knit fabric finishing subcategory.
Source: DPRA estimates based on survey and published data.
VI-7
-------
Table VI-4. Textile industry, representative existing indirect discharg-
ing model plants' capacities.
1.
2:
4.
5.
5c
6.
7.
8.
9.
Subcategory
Wool scouring
Wool finishing
Woven fabric
finishing
Knit fabric
finishing
.Hosiery ,,
products — '
Carpet finishing
Stock & yarn
finishing
Nonwoven
manufacturing
Felted fabric
processing
Capacity
Type Mill
Commission
Commission
Integrated
Commission
Own fabric
Integrated
Commission
Integrated
Own hosiery
Integrated
Integrated
Commission
Own yarn
Integrated
Smal
16.
3.
3.
2.
2.
2.
1.
2.
2.
8.
4.
4.
1
0
3
3
4
4
4
—
5
7
7
9
2
2
-
24.0
0.9
Medium
20.
26.
26.
20.
7.
7.
49.
9.
9.
9.
57.
-kkg
0
0
0
0
7
7
-
-
0
4
4
4
,0
4.4
Large X-Large
per da;
81.
40.
130.
130.
50.
18.
18.
13.
13.
122.
23.
23.
23.
-
0
0
0
0
0 170.0
6
6 31.0
6
6
0
0
0
0
10.7
Subdivision in the knit fabric finishing subcategory.,
Source: DPRA estimates based on survey and published data.
VI-8
-------
Table VI-5. Textile industry, new source
model plants' capacities
2.
4.
5.
5c
6.
7.
8.
9.
Subcategory
Wool finishing
Woven fabric
finishing
Knit fabric
finishing
. Hosiery
products 2J
Carpet finishing
Stock & yarn
finishing
Nonwoven
manufacturing
Felted fabric
processing
Type
mill
Integrated
Own fabric
Integrated
Integrated
Integrated
Integrated
Own yarn
Sizel/
Medium
Medi urn
Large
Large
Large
Medium
Large
Small
Medium
Medium
Medium
Medium
Direct
Dischargers
\t\.
20.0
NA
130.0
50.0
18.6
6.0
NA
20.0
NA
23.0
10-. 4
2.0
Indirect
Dischargers
9
20.0
26.0
NA
50.0
18.6
NA
13.6
NA
49.0
9.4
57.0
4.4
- Size designations correspond with the designations for existing model
plants.
2i
— Subdivision in- the knit fabric finishing subcategory.
Source: DPRA estimates based on survey and published data.
VI-9
-------
For the existing models, both direct and indirect dischargers, four size
designations were used to reflect the size structure within the subcate-
gories: small, medium, large, and x-large. Model plant capacities were
expressed in kilograms of textile materials processed per day. The models
with the largest capacities are the x-large integrated woven fabric models
with capacities of 170,000 and 200,000 kg per day for indirect (4c) and
direct dischargers (4b), respectively. The capacities of the medium and
large models of both the direct and indirect dischargers are generally the
same within each subcategory. However, the capacities of the small models
are significantly different, with the small indirect dischargers about half
the size of the small direct dischargers.
For the new source mills, only a limited number of models were developed
to reflect the most likely sizes and types to be constructed. The size
capacities of these models correspond with those of specific existing mills;
consequently, the same size designations were used.
No new source wool scouring (1) models were developed since it was not con-
sidered likely that any of these mills would be constructed in the foresee-
able future. In most cases, new source models were considered to be inte-
grated since this type of mill was considered to be the most likely to be
developed in the future. No new source commission models were developed
for any of the subcategories.
C. Operational Characteristics
The operational characteristics for the existing direct arid indirect dis-
chargers are summarized in Tables VI-6 and VI-7. These characteristics
were determined from the industry surveys as well as discussions with in-
dustry members and include data on daily capacity, utilization, annual pro-
duction and number of employees. The production and utilization rates for
the new source models were assumed to correspond to the same type and size
models of the existing mills. The new source models' numbers of employees
were assumed to be 15 percent fewer than the existing models. This slightly
reduced employment requirement reflects the utilization of labor saving
equipment and the requirement for a reduced maintenance force in the new
source mills. The operational characteristics for the new source models are
summarized in Table VI-8 for the direct dischargers and Table VI-9 for the
indirect dischargers.
Utilization rates were based on a 250 to 300 day work year and varied con-
siderably between type dischargers, subcategories, and size categories.
Two models reflected utilization rates of 100 percent—the large integrated
wool finishing (2) and felt (9) models; both direct dischargers. Among the
direct discharger models, the lowest utilization rate occurred in the small
wool scouring (1) mill (55 percent). Among the indirect dischargers, the
model with the lowest utilization rate was the small woven fabric model
(4a) with a rate of 57 percent. The rates of the remaining models in both
categories (direct and indirect dischargers) varied generally between 70
and 85 percent.
VI-10
-------
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VI-14
-------
Annual production quantities for the model plants were based on the daily
capacities and utilization rates shown in the tables and are expressed in
thousands of pounds of textile materials processed. The outputs of the wool
scouring models (1) reflected the quantity of clean wool produced. The outputs
of the remaining models represented a composite of the products produced within
each of the subcategories and do not represent any specific sizes or weights
of material. For example, the outputs of the woven fabric mills (4) repre-
sented a combination of manmade and cotton woven fabric piece goods, sheets,
towels, blankets, and other broadwoven fabrics and the outputs of the knit
fabric mills represented a combination of warp and circular knit fabric,
and outerwear and underwear apparel.
The estimated number of production and nonproduction workers employed in
each of the model plants is also shown in the tables. The numbers of em-
ployees varied significantly not only between models in the subcategories
but also between the types of mills. The most labor intensive models fell
in the hosiery products subdivision (5c) although the total number of em-
ployees in this subdivision is relatively small. For all models, the inte-
grated models were more labor intensive than the finishers (both commission
and own fabric) due to the added requirement for workers in the greige mill
operations. The number of employees in the new source models was assumed to
be 15 percent fewer than in the existing models as a result of increased
efficiencies.
D. Investment Characteristics
The investment characteristics for the existing direct discharging, existing
indirect, and new source direct, and new source indirect models are depicted
in Tables VI-10, 11, 12 and 13, respectively. Included in these tables are
estimates for the models' assets (both fixed and current), current liabilities,
net working capital, total invested capital, and salvage values for non-
conforming uses. These are discussed below.
1. Fixed Assets
The fixed assets depicted in the tables are considered reflective of net or
book values of the buildings, equipment, and land. As would be expected in
an industry with a substantial number of older plants and equipment, the book
values of the models' assets reflect significant levels of depreciation. The
models' fixed assets were estimated from information provided in the industry
surveys.
2. Net Working Capital
The models' net working capital or operating capital is defined as that
capital necessary to maintain the day to day operations of the mills.
Included in the computation of this capital are a firm's current assets
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