2 Japanese Firms to Build State’s First Cotton Mill : Fast-Growing Market Lured Facility to Fresno
Two major Japanese companies said Wednesday that they are teaming up to build the first cotton mill in California, a $45-million plant in Fresno that will process cotton grown in the San Joaquin Valley.
Nisshinbo Industries, one of Japan’s largest textile makers, and Kanematsu-Gosho, the eighth-largest Japanese trading company, said the mill, scheduled to open in October, 1989, will initially employ 170. The spinning and weaving plant will ship its cotton cloth to California apparel makers, who have a ravenous demand for pure cotton fabric.
“The key factor for our decision is the fast-growing market in California that we didn’t have here 15 years ago,” said Kaz Fujisaki, manager of the textile department at Kanematsu-Gosho’s Los Angeles office.
Selection of a West Coast site is a major departure from the concentration of U.S. cotton mills in the South. “It’s definitely not your typical location,” said Kay Norwood, an analyst at Interstate Securities Corp. in Charlotte, N.C.
Bruce Groefsema, vice president of export sales at CalCot Ltd., a major cotton cooperative in Bakersfield, said the Japanese plant may be only the second to be located west of Mississippi. He said the Plains Cotton Cooperative Assn. in Lubbock, Tex., operates a mill in that city.
Looking to Diversify
Future expansion at the 36-acre Fresno site could eventually bring the total Japanese investment to $100 million and the number of jobs to 500. The plant may eventually ship product out of the United States. Nisshinbo holds a 75% interest and Kanematsu-Gosho 25% in the joint venture to be known as Nisshinbo California. It is targeting first-year sales of $24 million.
Nisshinbo, like other Japanese companies, according to Seiichiro Izumi, a special adviser at Kanematsu-Gosho, is “looking for diversification of product and locations because of the exchange rate.” He said Japan’s imports of textiles exceeded exports for the first time in 1987.
Earlier this year, Kanematsu-Gosho and Kanebo Textile, another major Japanese textile manufacturer, disclosed plans to build a $20-million cotton yarn mill in Tifton, Ga., which will open in late 1989. Two other Japanese spinning mills operating in the United States are Tsuzuki Spinning Co. in South Carolina and Omi Kenshi in Georgia.
The Japanese and other foreign textile makers are moving into the U.S. textile business at a time when mill capacity to produce yarn “is extremely tight,” analyst Norwood said.
“When you look at the history of the textile industry the last couple of years, it has been one of contraction, particularly in the spinning area. An awful lot of U.S. mills have closed since 1984 because of imports. . . . A lot of the spinning capacity was family owned. A lot of companies didn’t have the capital to modernize and were unable to retain their customers.”
California Demand High
Meanwhile, imports have lost their luster because of the long lead time on overseas orders, problems with quotas and inventory, and custom clearance delays. “The swing is back to domestically produced goods, because of well-publicized problems with imported goods that are primarily related to the long delivery time,” Norwood explained.
Fujisaki said the California garment trade uses about 8 million to 10 million yards a month of 63-inch-wide “gray” 100% cotton cloth, which is actually creme colored and dyed or printed by apparel makers. The cloth is in demand for California-style sportswear.
He estimated a 10% average annual growth rate for demand for this fabric. Currently about 80% of the cloth is imported, primarily from China, Malaysia, Pakistan and South Korea. Nisshinbo, which has eight factories in Japan and one in Brazil, does not produce gray cotton cloth now.
The Japanese company expects to be able to sell its product for a little more than imports because it believes that U.S. buyers would be willing to a pay a small premium for the convenience of quick response time, no inventory and a shorter order time. Apparel makers, in some cases, have to place orders for imports six to nine months in advance, giving them little flexibility.
Cotton growers in San Joaquin Valley produce about 3 million bales of cotton annually. Two-thirds of the raw cotton goes overseas, while the rest is processed in the South.
Nisshinbo’s Tokyo parent had 1987 sales of $1.45 billion, while Kanematsu-Gosho had worldwide revenue of $23.19 billion in the same year.
