Textile manufacturing returns to Carolinas – by way of China

INDIAN LAND, SC – Next spring, spinning wheels will hum again in Lancaster County, S.C.

Keer, a textile company headquartered two hours north of Shanghai, China, is building yarn manufacturing lines in Indian Land, about 5 miles south of Ballantyne, bringing more than 500 jobs.

The Carolinas were once the epicenter of the U.S. textile industry, but since the late 1990s, thousands of jobs were lost when emerging markets joined the game, touting cheaper materials and labor. Carolinas textile jobs went to China, Brazil, Vietnam and elsewhere.

Now, in a switch, Chinese companies are looking to manufacture in the U.S., lured by lower costs of energy, cotton, and land, and wary of rising labor costs in China.

Wally Wang, deputy general manager at Keer America, believes more Chinese textile companies and other manufacturers will follow Keer to the U.S.

That would be welcome in Lancaster County, where the pain of textile job losses still resonates.

Carolyn Summers, who had worked for Springs Industries in Lancaster for 42 years, was 63 when she was laid off in 2005. Summers’ daughter, who worked for Springs as a bedding products designer, lost her job two years later.

“They opened the door wider for more imports to come into the country,” Summers said. “We got flooded with a lot more cheaper textiles than we were able to produce.” She remembers leaving the factory “in total shock” the day she heard the news.

Springs Mills in Lancaster once employed close to 20,000 people, but in 2007, the last South Carolina textile factory closed. Springs Global reports it employs fewer than 450 in four S.C. locations that handle warehouse, distribution, and services.

Lancaster County lost 11,000 textile jobs of all types from 1995 to 2007. The greater Charlotte-Gastonia-Rock Hill region lost about 26,000 jobs at textile mills in the past 20 years, according to Federal Reserve data.

Since the factories closed, Summers said, “we haven’t had the luxury of textile here. We didn’t think that’d ever come back.”

$218 million investment

Tires were scrunching the gravel on a recent afternoon at the Keer construction site on S.C. 160, where about 100 workers are finishing the exterior of Keer’s 230,000-square-foot factory. The 10-month construction project is set to finish in December.

At least 140 employees will work at the site starting next spring. Most will be manufacturing workers, making yarn on 32 production lines.

China’s market share in the global textile industry had been rocketing in the past two decades, but lately, Chinese textile companies have been stressed by competition within China and by that nation’s rising costs of labor, power and land.

Keer decided to relocate part of its yarn production line to Indian Land, a $218 million investment.

While the first plant operates, construction workers will lay the foundation for a second factory to the south of it. The construction will take less than one and a half years. After that, Keer intends to build two more factories – for a total of 1 million square feet and more than 500 jobs.

SC Ready, a workforce training program in South Carolina, is helping Keer recruit and train local electricians, technicians and fabric sales representatives. One third of the program applicants are former textile workers who want to go back to the industry.

By starting production in the U.S., Keer believes it has blazed a trail that other Chinese textile companies will follow. In a Chinese idiom, it’s “the first one who dares to eat the crab” – meaning many will follow after a “first.”

Going where cotton is

Nearly two hundred years ago, cotton brought textile mills to the Carolinas. Now it’s cotton that’s bringing them back.

“Cotton price is the biggest challenge to our profit” in China, Wang said. Cheaper cotton in the U.S. is a major draw.

In the past three years, the Chinese government has been stockpiling domestic cotton to boost price, subsidizing disadvantaged local growers in the market. There’s a cap set by the government, as well, when textile companies want to import foreign cotton.

Chinese cotton is priced at about $2,889 per ton this month, when American cotton is almost one-third cheaper, priced at about $2,006 per ton.

Keer’s first S.C. factory will consume 30,000 tons of cotton per year to reach an annual yarn production of about 28 thousand tons, estimated Wang.

“The Chinese textile industry has been undergoing great changes and restructuring,” said Yingjiao Xu, associate professor at the College of Textiles at N.C. State University. She said Chinese textile companies are looking to start manufacturing in other parts of China and other countries to operate less expensively.

The cost of Chinese manufacturing kept rising in the past few years. Feeling the competition in China too intense, Keer, whose assets exceeded $322 million in 2010, looked toward the Carolinas, after ruling out Vietnam, India and Pakistan as potential destinations.

Keer’s yarn production had been using American cotton for years, now they simply moved closer to be able to use more.

Wang counted the list of benefits Keer can enjoy in South Carolina. “It is a state built on manufacturing; its workforce is used to the 24-7 schedule; it has the super low labor union member rate; its government has a lot of benefiting policies; it has a variety of manufacturing industries in the region; its electricity supply is cheap and stable…”

Said Wang: “Except for human labor, all other production factors are cheaper in the U.S.”

Now, Keer’s factory will have Carolina-grown cotton coming in through its north gate. The south gate faces Charleston, where a large portion of finished yarn products will be shipped back to China, a center of apparel manufacturing.

Recruitment efforts

The Charlotte Chamber and South Carolina Department of Commerce had both talked for months with Keer before the company decided to set up operations in South Carolina.

John Ling, a China native who has worked for the S.C. Department of Commerce for almost 15 years, has been based in Shanghai since 2005. Ling first met Keer CEO Zhu Shanqing in March 2012.

The N.C. Department of Commerce has had an office in Hong Kong for more than 20 years, and opened a Shanghai office in 2009. The China staff focuses on boosting North Carolina companies’ exports to the Chinese market as well as company recruitment. The Charlotte Chamber started to focus on its Chinese recruitment efforts in 2007 by adding a Mandarin-speaking recruiter.

Keer announced in December it would place its plant in South Carolina. It also has an office in uptown Charlotte that houses financial and executive staff.

South Carolina offered a $4 million grant to Keer. Lancaster County provided $7.7 million in bond support that will be paid by property taxes generated from Keer’s operation.

“We are very aggressive on the incentive side, if it’s the right company with the right fit like Keer,” said Keith Tunnell, president of Lancaster County Economic Development Corp.

While Lancaster County is branding itself as the “U.S. textile technology corridor,” Tunnell said they are also seeking opportunities in the general manufacturing sector. The county has four recruiting projects going on in Asia at the moment.

China still “the world factory”?

To be sure, China retains its competitive advantage in many areas of textile manufacturing, including labor-intensive apparel production, which benefits from low labor costs, according to Professor Xu. The manufacture of yarn and fabrics, however, is more automated – giving U.S. sites an upper hand because of lower-cost energy.

Keer took the lead in approaching the S.C. Department of Commerce, which surprised Ling, who at first doubted a Chinese textile company would even think about going to the U.S.

“The cost difference between the two countries has certainly been narrowed greatly in recent years,” said Ling.

A turning point came in 2010, when the Chinese government introduced a series of bank loan and financing benefits for private enterprises to invest abroad.

Previously, the S.C. Department of Commerce worked on just three to five Chinese investment projects every year, but now, there are 20 to 25 Chinese companies visiting South Carolina to evaluate investment opportunities every year, according to Ling.

In North Carolina, direct investment from China has totaled more than $178 million since 2010. Last year, Lenovo, the Chinese computer maker with an executive headquarters in Morrisville, opened a manufacturing facility in Guilford County, and China Tabacco set up its American headquarters in Cary.

Doug Woodward, economics professor at University of South Carolina, described the incoming Chinese companies “are small tiptoes into the U.S. for these big companies.” But “it’s just the beginning,” he believes.

Wang, now based in an office in uptown Charlotte, is coordinating resources across the two hemispheres. He said Chinese investment in the U.S. “was like water drops, but now there’s a little stream flowing.”