The ongoing debt crisis in several countries of Europe, along with a slowdown in the US economy, has indirectly resulted in plummet of cotton prices in China.
There is a change in consumer behaviour in Europe and the US, who are spending less on apparels. This has seriously affected China's textile and garment exports.
The decrease in demand for cotton products in the US can be seen from the fact that the US worldwide imports of cotton products declined by 11.18 percent year-on-year from January to September this year.
Textile and apparel orders received by China have not been optimistic since April this year. The number of orders dwindled in the third quarter and a there was further decline in October. The rapidly reducing textile and apparel export orders from the EU and the US indicate that the Chinese textile and garment exports will remain weak in the first half of 2012.
As a consequence of the slump in textile and garment exports this year, the demand for cotton by local fabric and garment manufacturing companies had declined, causing the price of cotton to plummet in the Chinese market.
In order to ensure stability to cotton production and price, the Chinese Government launched a temporary cotton storage plan on September 8, under which the Government is procuring standard grade lint at 19,800 yuan/ton.
According to the China National Cotton Reserves Corporation, the price of cotton yarn will continue to fall in China, as the sales of yarn and fabrics are still sluggish. In addition, some upstream and downstream textile enterprises have ceased production owing to high inventory of finished products.
On the supply side, global cotton production is adequate. In October, the US Department of Agriculture estimated the 2011 cotton stock to increase 22.02 percent compared with 2010.
Thus, the lack of demand owing to European debt crisis and adequate supply will mean that the price of cotton and yarn will not increase in near future.
Fibre2fashion News Desk - China
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