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Apparel producers affected by rising cotton costs
May '10
As they struggle to deal with competing international market for their overseas sales, China's textile producer's lives get tougher, as with the increasing cotton prices, their already narrowed profit margins, amongst the country's apparel producers, starts to wear down.

According to an employee from a textile firm, the cotton prices are rising exorbitantly, so much so that, the cotton fabric costs has increased by about 1 yuan ($0.15 cents) per metre, indicating a price rise of around 2 yuan ($0.29) per apparel.

This employee further stated that, his firm exported its goods mainly to Japan, but with the rising prices of raw materials, employees dreaded that the company's profits will soon reduce by atleast 20-30 percent.

Since early May, while the cost of superior quality cotton sold to textile producers was sloshed by 500 yuan ($73.21) per ton or nearly 3 percent, the cost of low quality cotton remained almost unchanged, informed a distributor from Anyang, Central China's Henan Province.

However, as per data released by the China's General Administration of Customs, exports of textiles slowly started dipping on month-on-month basis from January to March, but the average export value in the first quarter, increased by 15.2 percent as compared to the corresponding period, last year.

Whilst as per the China Chamber of Commerce for Import and Export of Textiles, the aggregate profit margin amongst textile producers is almost 3-5 percent and even less than this for few others.

The China Cotton Association informs that, the weighted aggregate instant cost of grade-three cotton or standard grade cotton was 17,323 yuan ($2,536) per ton, which is atleast 30 percent more than last year's figures recorded in the month of September.

According to an industry expert, the rise in cotton price is quite normal, revealing only the slump period in 2003-04. As for superior quality cotton, snowfall and rains hindered cultivation sites, which were the vital manufacturing areas, thereby, leading to reduced output.

In addition, few distributors have stocked cotton in a hope to sell the same when the market costs increases even more. Most of the textile producers have stocked 38-day inventories, which is 16 percent higher than normal. Some of them even have stocks that can last till new cotton output hits the market in August, added this expert.

Fibre2Fashion News Desk - India

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