Pitti Filati: yarns sector figures

THE ITALIAN YARN INDUSTRY IN 2016-2017

Notes by

Centro studi

The preliminary balance sheet for 2016

The Italian yarn industry (in this context, inclusive of production of wool, cotton, and linen yarns) once again experienced an unfavorable performance in 2016.

According to the preliminary figures processed by SMI, based on both macro variables and internal sample survey data, yarn industry sales are estimated to have fallen off by an average of -2.6% on an annual basis, a dynamic which depressed sector turnover to just a little over the 2.8 billion euro mark.

More in detail, the fall in foreign demand influenced overall yarn industry sales. On the other hand, the Italian domestic market demonstrated greater interest (as suggested by the import and apparent consumption trend) which, nevertheless, also in the wake of weak sector values (the spinning production pricing index monitored by ISTAT was down by -2.8% in the domestic market in the period January-November), did not succeed in compensating for overseas losses, where pricing instead held steady (+0.1% according to ISTAT).

Table 1 - The Italian Yarn Industry(1) (2011-2016*)

(millions euro at current value)

The estimated 2016 drop-off rate for Italian spinning is -2.6%

2012	2013	2014	2015	2016*
Sales	3.113	2.979	2.918	2.917	2.842
% Var.	-4,3	-2,0	0,0	-2,6
Value of Production	1.988	1.885	1.834	1.820	1.811
% Var.	-5,2	-2,7	-0,8	-0,5
Exports	929	898	871	871	832
% Var.	-3,4	-3,0	0,0	-4,5
Imports	851	831	833	849	881
% Var.	-2,3	0,3	1,9	3,8
Trade Balance	78	66	38	22	-49
Apparent Consumption	1.910	1.819	1.797	1.798	1.860
% Var.	-4,8	-1,2	0,1	3,4
Structural Indicators (%)
Exports/Sales	29,8	30,1	29,8	29,8	29,3
Imports/Apparent Consumption	44,5	45,7	46,4	47,2	47,4
Source: ISTAT and internal survey data processed by SMI.
(1) - Wool, cotton, and linen yarns;
* Estimates

The downtrend in turnover ties together all three sub-sectors considered here, even if wool spinning maintains a moderate fall-off rate with respect to cotton/linen.

The value of production (a variable intended to estimate the value of Italian production alone, net marketing of imported yarns), is expected to slightly drop from the levels of 2015 (-0.5%), with a better performance recorded for volume over value.

As already mentioned, foreign markets were disappointing: although the first three months of 2016 showed favorable results, at least for wool and linen yarns, with the passing of each month, the situation progressively declined. It is thus estimated that exports will close the twelve-month period down by -4.5%, with sector foreign sales amounting to 832 million euro. At the same time, imports should close with an estimated +3.8% increase, for a total of nearly 881 million euro.

Given the foreign trade trends outlined above, the trade balance for Italian spinning, as previously recorded in 2011, returns to a deficit for a value equal to 49 million euro.

Analysis of apparent consumption, a variable which allows us to monitor developments on the domestic market, would lead us to estimate a moderate level of dynamism, at around

+3.4%, after the drop recorded last year.

Based on the data supplied by the companies replying to the SMI Sample Survey, employment numbers in wool spinning for the first three months of the year continued to drop, by -1.1%, -1.4%, and 1.9% respectively.

Foreign trade in the first ten months of 2016

If we focus our analysis on the first ten months of 2016, the ISTAT data available to date gives us a more detailed breakdown, by goods categories, of exchanges with foreign markets. In this period, spinning as a whole showed a drop-off of -3.8% in exports, while imports recorded a moderate growth equal to +4.9%. Accordingly, imports rose to the 757 million euro mark, exceeding exports by 37 million euro. Moreover, the foreign trade surplus was attributable to carded wool yarns and needlework yarns.

For exports, the overall negative dynamic is generalized, though at different rhythms for each sub-sector: carded wool yarns lost 5.0%, chemical fiber/wool yarns were down by - 1.9%, while needlework yarns recorded a fall-off equal to -14.1%. Foreign sales of cotton yarns recorded a drop-off of -4.3%, while linen yarns decreased by -4.9%.

Only combed wool yarn exports registered a meager positive variation of +0.4%, for a total of 220 million euro, as the leading export product in the Italian yarn industry.

For exports, we expect to see a -4.5% average annual decrease, while imports should close with a +3.8% increase.

The foreign trade balance returned to a deficit in 2016 for 49 million euro.

From January through October 2016, yarn exports slowed by - 3.8% and imports instead gained by

+4.9%.

Table 2 - Italian Yarn Industry Foreign Trade in the Period

Imports	Exports	Balance
Millions euro	% Var.	Millions euro	% Var.	Millions euro
Carded wool yarns	34	2,5	162	-5,0	128
Combed wool yarns	274	7,3	220	0,4	-54
Chemical fiber/wool yarns	96	5,6	88	-1,9	-8,3
Needlework yarns	11	7,8	63	-14,1	52
Cotton yarns	271	1,0	157	-4,3	-114
Linen yarns	71	11,8	31	-4,9	-40
Total Yarns	757	4,9	720	-3,8	-37
Source: ISTAT data processed by SMI

January-October 2016: Analysis by Sub-sectors

At the same time, from January through October 2016, overseas yarn imports experienced a dynamic growth trend, though at extremely different rates for each sub-sector. With regards to wool yarn imports, carded yarn imports grew by +2.5%, combed yarns were up +7.3%, and blends recorded a +5.6% increase, while needlework yarns experienced growth equal to +7.8%. Cotton yarns did not exceed +1.0%, while linen yarns accelerated by +11.8%.

Analysis of the customer markets gives us more detail. Exports of carded yarns to Hong Kong and Croatia recorded a significant downturn, at -14.8% and -12.3% respectively. Conversely, exports to the United Kingdom experienced a slight upturn at +0.7%, while growing by almost +50% to South Korea. In reference to other markets with less of an impact, China dropped off by -21.6%, Portugal by -12.1%, and Tunisia by -4.8%. Although Turkey did not exceed an increase of +0.7%, Romania and Bulgaria grew respectively by

+21.1% and +19.9%.

From January through October 2016, combed yarn exports, in a trend similar to carded yarns, experienced a dramatic drop to Hong Kong (-20.5%), while an upswing was recorded in reference to Romania (+18.7%). The Czech Republic, as the third export destination, registered an increase equal to +39.5%. From one end, a dichotomous trend characterized France and Turkey, both up by +8.0% and +10.6% respectively, while, from the other end, China, Germany, and the United Kingdom all decreased by -6.5%, -17.9%, and -9.1%. Finally, the growth registered by Bulgaria (+3.5%), was offset by the downturn of Tunisia (-4.8%).

Foreign sales of chemical fiber/wool blends recorded an important upturn in Croatia (+11.4%), Portugal (+29.2%), and Spain (+42.5%); while, conversely, contracting by -28.3% in Turkey. A general downturn in sales, though at different rhythms, was also recorded in Austria (-2.7%), Hong Kong (-4.8%), Romania (-13.6%), France (-15.0%) and Bulgaria (-0.6%). Germany, instead, registered an upswing of +21.6%.

Exports of carded yarns to Hong Kong and Croatia experienced a drop, while increasing to the United Kingdom and South Korea.

Exports of combed yarns recorded a fall- off to Hong Kong, while experiencing an upturn to Romania and the Czech Republic

Exports of chemical fiber/wool blend yarns toted up an increase to Croatia, Portugal, and Spain.

Table 3 - Exports of Industrial Yarns: Country-by-Country Analysis

(period: January-October 2016)

3.1 - Carded wool and fine-hair yarns 3.2 - Combed wool and fine-haired yarns

Country of destination	Millions euro	% Var.	% Share
TOTAL	162	-5,0	100,0
of which:
Intra-EU 28	73	-3,8	45,0
Extra-EU 28	89	-6,0	55,0
Top ten customer countries
Hong Kong	37	-14,8	22,6
United Kingdom	26	0,7	16,0
South Korea	11	49,7	7,0
Croatia	11	-12,3	6,7
Turkey	8	0,7	4,9
China	8	-21,6	4,9
Romania	7	21,1	4,2
Portugal	6	-12,1	4,0
Bulgaria	5	19,9	3,1
Tunisia	5	-4,8	2,9

Country of destination	Millions euro	% Var.	% Share
TOTAL	220	0,4	100,0
of which:
Intra-EU 28	122	11,0	55,3
Extra-EU 28	99	-10,3	44,7
Top ten customer countries
Hong Kong	37	-20,5	16,9
Romania	24	18,7	11,1
Czech Republic	21	39,5	9,3
China	16	-6,5	7,1
France	16	8,0	7,1
Germany	12	-17,9	5,3
Turkey	11	10,6	5,0
United Kingdom	10	-9,1	4,6
Bulgaria	8	3,5	3,8
Tunisia	6	-4,8	2,8

3.3 - Cotton yarns 3.4 - Chemical fiber/wool yarns

Country of destination	Millions euro	% Var.	% Share
TOTAL	157	-4,3	100,0
of which:
Intra-EU 28	115	-7,0	73,2
Extra-EU 28	42	3,9	26,8
Top ten customer countries
Germany	20	-5,0	12,9
Czech Republic	19	1,4	12,0
Croatia	10	-9,6	6,4
Spain	9	3,1	5,8
Hungary	9	2,2	5,8
France	9	6,9	5,8
United Kingdom	9	2,7	5,8
Romania	9	-2,2	5,6
Austria	5	-53,1	3,4
Hong Kong	5	-23,5	3,2

Country of destination	Millions euro	% Var.	% Share
TOTAL	88	-1,9	100,0
of which:
Intra-EU 28	59	4,3	67,1
Extra-EU 28	29	-12,6	32,9
Top ten customer countries
Croatia	9	11,4	10,0
Turkey	9	-28,3	9,7
Portugal	7	29,2	8,0
Spain	7	42,5	7,8
Austria	6	-2,7	7,2
Hong Kong	6	-4,8	7,1
Romania	6	-13,6	6,8
France	5	-15,0	6,0
Germany	5	21,6	5,8
Bulgaria	4	-0,6	5,1

Source: ISTAT data processed by SMI

As concerns exports of cotton yarns in the first ten months of 2016, outgoing flows to Germany and Croatia decreased by -5% and -9.6% respectively. Conversely, a positive evolution characterized all the other leading markets of reference, including the Czech Republic (+1.4%),

Foreign sales of cotton yarns lost ground in Germany and Croatia, while growing in other markets.