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Garment firms upset in spite of rise in orders
30
Dec '10
Greater number of orders for garments is flowing in for 2011, as also the prices for the commodity are rising, but still the garment firms are worried.

The garment firms, mainly are apprehensive in accepting the FOB (Freight on Board) contracts due to the concern that, the rise in price of the end products may not be in line with the rise in the price of cotton.

It is believed that, there has been year-on-year rise of almost 10-15 percent in the prices under FOB contracts, whereas prices of those under outsourcing contracts have jumped by around three to four percent. Meanwhile, several firms have booked orders that are sufficient enough to keep them busy till the close of the second quarter of 2011.

The industry's earnings for this year are likely to rise to US$11 billion that is 22 percent higher than the last year's earnings.

Further, as the rise in export prices fails to match the rise in the price of cotton, the garment firms have been advised to cautiously think over the contracts before signing them, so as to shun heavy losses.

Cotton now is being traded at around $3.1-3.4 per kilogram, which is almost double the price at which it was traded in the early part of current year. This rise in the commodity price, to some extent is because, India, the second largest exporter of cotton across the world, restricted its cotton exports to meet its domestic requirements. Besides, as natural calamities badly hit the cotton produce in China, the biggest consumer of cotton throughout the world, it was required to import extra 800,000 tons of cotton to balance the short fall.

Vietnam now produces only five percent of its total requirement and needs to import a larger part of the material from US, Africa and India, to meet the domestic demand. As per the estimations, the country this year would import 370,000 tons of cotton, as against last year's 300,000 tons.

Further, the rise in imports and the speculation in the market are seen to carry forward the rise in the cotton prices in the world markets, to next year too. Moreover, the demand-supply gap too is also expected to keep the commodity price high.

Moreover, as the domestic firms need to rapidly regain the capital for production purposes, they are required to import cotton at least three months before.

Fibre2fashion News Desk - India

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