Tuesday, May 02, 2006

Consumer goods / Textiles / Industry hierarchy 0 comments

(P.S: Sorry for any disturbances the advertisements above may have caused you)

There is a substantial number of textile companies on the SGX now. Locally we have old-timers like Ban Joo and Ocean Sky, but the real story is the emergence of textile stocks from China. The latter is set to be the world's No. 1 production base (probably rivalled by India) for textiles and garments, following the end of the global quota system in 2005 and the subsequent ironing out of trade disputes over the sudden rash of clothing exports from China to the developed countries (especially Europe).

Each of the various listed textile companies are involved in different parts of the textile production process. The textile manufacturing process below is for machine production of chemical fibres, since that is what most of the listed companies are involved in. It is useful to think of the manufacturing process as a sequential step-up in dimensional texture: from point (chips) --> one-dimensional (fibres/yarns) --> two-dimensional (fabric) --> three-dimensional (apparel).

Chips: The main raw materials required for the production of fibres. They are oil-derived and so the producers of these chips are highly sensitive to oil prices. Note that (1)there are different types of chips for different textile types eg. polyamide for nylon, PET for polyester; (2)there are different grades of chips used for various non-textile purposes eg. PET (bottle grade) used for PET bottles such as that produced by Full Apex.
Listed companies involved: CG Tech (PET chips)
Fibres/Yarns: Essentially, the production process involves melting of the chips and then extruding (pulling) the molten material to form fibres. They then undergo spinning which joins the individual fibres into a yarn (sort of like the way that electric wires are twisted inside cables) and then a drawing process which stretches the yarns. The production parameters of the various processes (extrusion, spinning, drawing) determine the strength and elasticity of the final yarns.
Listed companies involved: China Sky (nylon fibres), Fibrechem (polyester fibres)
Fabrics: Through knitting or weaving machines that turn the one-dimensional yarn into two-dimensional fabric. The fabric then undergoes pressing to iron out any creases.
Listed companies involved: None that I know of
Apparel manufacturing: The apparel factory receives the fabric and cuts the cloth according to design, does the sewing and apparel "assembly". Any embroidery work and special dyeing might be outsourced. The finished apparel then undergoes washing, inspection and final packing to the end customers, such as the big department stores like Wal-mart and Sears, or specialty retailers like Gap and Ralph Lauren etc.
Listed companies involved: Ocean Sky, Ban Joo. Jishan provides specialty dyeing services.

(1) Wikipedia article: Textile manufacturing
(2) CG Tech IPO prospectus
(3) China Sky IPO prospectus
(4) Fibrechem IPO prospectus
(5) Ocean Sky IPO prospectus
(6) Jishan IPO prospectus




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