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Cost analysis of spinning mills show raw materials, power important factors

"Today, the availability of cotton and synthetic staple fibers is not a problem. In 2013-14 season, for the third time in a row, the main production countries supplied more raw material than what was processed by spinning mills. In the case of cotton, in particular, 87 per cent of annual consumption is held in storage throughout the world. As an agricultural product fibers are not subject to the rules of the World Trade Organisation (WTO), there are regional differences in fiber prices."

 

CSIRO ScienceImage

The choice of location for setting up a spinning mill depends on a number of decisive factors. An entrepreneur must reckon with different costs for energy depending on the location. Wages and their growth influence the decision about where an investment is successful. With textile industry on upward growth curve, investment opportunities are high, a spinning mill entrepreneur must be aware of the major factors that could affect business, and the risks and opportunities of his investment. An ITMF (International Textile Manufacturers Federation) report analyses that raw material and energy have a dominant influence on yarn costs. Other factors important for long-term success are: yarn manufacturing costs, the availability of trained personnel and market access.

 

Availability of raw materials

CSIRO

Today, the availability of cotton and synthetic staple fibers is not a problem. In 2013-14 season, for the third time in a row, the main production countries supplied more raw material than what was processed by spinning mills. In the case of cotton, in particular, 87 per cent of annual consumption is held in storage throughout the world. As an agricultural product fibers are not subject to the rules of the World Trade Organisation (WTO), there are regional differences in fiber prices.

In India, raw materials are cheaper than the other countries. Prices fluctuate less than on the international market, making planning easier. The price of raw material is the crucial factor for manufacturing yarn. As the prices of synthetic fibers usually follow cotton, this supports an investment in India.

Energy costs

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Studies show the great importance of energy consumption in relation to yarn manufacturing costs in spinning. A global look at average costs reveals that the price of energy has increased in some countries, at times significantly. Energy consumption depends on the spinning technology, age, condition and producer of the spinning machine, raw material and yarn count. Energy costs depend on consumption and local prices. A precise comparison on the basis of the planned product range is worthwhile in any case.

Availability of workforce In typical producing countries wages play a subordinate role in yarn production. Rather, the decisive issue is the availability of well-trained personnel. Automated spinning machines not only solve this problem, they also increase efficiency and yarn quality at the same time. Automation of the spinning mill is the solution for the non availability of trained work force.

Market accessibility In a global environment, the costs between manufacturer and customer are often underestimated - transportation, exchange rates and the hedging thereof as well as customs duties etc. Investment decision must take into account the cost of entire textile value chain. Growing domestic markets are attractive because exchange rate risks and customs duties do not apply and transport costs are low. Growing markets such as China and India are attractive for this reason. Good relations in mutual trade, which allow simplified, duty-free imports, influence decision regarding location.

Sustainable manufacturing costs

Competition will close, if yarn manufacturing costs alone are higher, excluding the raw material. The spinner who can offer lowest manufacturing costs with good, consistent quality establishes the most sustainable position in this competitive global marketplace.

 
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