Soaring world cotton prices are set to push up thecost of shirts, blouses, underwear and other clothing on the High Street. Therecent surge in the market price could make the cost of a £12 T-shirt leap bymore than £1, experts warned. In U.S.A price movementswould lift the cost of the cotton T-shirt from about 32p to 47p, mean a sevenper cent increase to the retailer.


Since March last year, the price of basic cottonfibre has soared by 80 per cent to a 15-year high of 90 cents (59p) per pound. Some stores may absorb this rise, but others will pass iton. Economicrecovery and rising demand from developing countries have put a squeeze oncotton users. 'Cotton is 15% to 20% of the textile component of what people arewearing,' said Allen Terhaar, executive director of Cotton CouncilInternational, the American export body. 'Consumption worldwide is nowexceeding production and prices are going up.


In Indian Garment market price expected to raise by at least10% by the early May-2010, the second hike in first half of 2010, to offsetspiraling raw material costs. Cotton prices have gone up by over 25% to Rs. 29000per candy, or Rs. 355.5 kg, in the past five months. Yarn and fabric priceshave risen by nearly 50% during the same period.


When India announced plans to immediately cease all cottonexports, cotton spiked 4 percent in one day to 87.1 cents per pound the highestit has been since early 2008. In the wake of Indias announcement, Pakistan said it could see the closure of 70 percent of its spinning plants by the end ofMay because of a cotton shortage and the prohibitively high cost of importingcotton.


The domestic currency has appreciated by nearly 14.5%against the Euro, and over 5% against the dollar in the past five months. Toadd to the textile industries troubles, cotton and yarn rates have increased by20-25% in the past six months on speculative commodity futures trading and anincrease in exports to countries like Bangladesh, Korea and China.


Only recently, companies were looking forward to reneweddemand from the West, after the 2008-2009 economic recessions left them out inthe cold and millions were rendered jobless. Textile exports registered adecline of 1.71% to $21.75 billion during April 2009-March 2010, compared to$22.13 billion in the previous years corresponding period, according toAssociated Chambers of Commerce and Industry of India.


 

Notes from Experts:


  • Exporters are not able to pass on the increase in yarn prices to buyers, said A Sakthivel, president of Tirupur Exporters Association.
  • Jaipur-based exporters are also feeling the pinch. Our costing has gone up by 25-30% a unit due to fabric prices being hiked by 60-70%, said GP Mittal, president of Garment Export Association of Rajasthan.
  • Garment exports from India to the US, the European Union and Japan are likely to pick up in months ahead on the back of improvement in their retail markets, Confederation of Indian Textile Industries (CITI) General Secretary D K Nair said.


Effect on Garment Exports:


Indian and Bangladeshi garment exporters have started getting better prices now in the US. There are signs of improvement even in the retail market of the EU, all of which indicates that garment exports are slated to improve in the coming months.


The Apparel Export Promotion Council also expects the April export figures to show improvement, even though the industry went through a rough time with outbound shipments dropping 10.16 per cent to $7.92 billion in April-January period of fiscal 2009-10 over the last one.


However, the strength of the Indian currency is a cause of concern for exporters, Nair said.


"The concern now is that of rupee exchange rates. The rupee has strengthened to Rs 44 a dollar from Rs 52 a dollar. This is affecting exporters' earnings," he said.


Also cotton fibre and synthetic raw material is becoming more expensive. Rupee strength, amid this, can be very challenging for us, he added.


Meanwhile, the textiles ministry has set a target of increasing India's share in the global garment export market to seven per cent by 2012.


Across the border in Bangladesh, the situation is much worse, as its garment industry is dependent on imported cotton. Between July 2009 and January 2010, its exports of knitwear declined 13% and woven garments by 16%.



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