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Weak cotton price fails to cheer up Chinese textile firms
03
Jun '13
The price of cotton has fallen considerably since its high of over 30,000 yuan/ton witnessed a couple of years ago. But, this has failed to cheer up the Chinese textile firms.
 
Currently, domestic cotton prices show a weak pattern, but Chinese textile enterprises are not very optimistic, according to experts.
 
They say there is still a large difference in prices of domestic and international cotton and this becomes a major problem for cotton textile enterprises in China.
 
It is because foreign companies usually calculate price in relation to prevailing international cotton prices when they place orders, but since Chinese enterprises use cotton procured at domestic prices to produce cotton yarn, their profits are squeezed.
 
According to an industry analyst, the cost of raw cotton generally accounts for 70 percent or more of the cotton yarn production cost. For production of one ton of cotton yarn, at least 1.1 tons of cotton is needed. Currently, the raw material cost is about 21,000 yuan/ton, while the price of cotton yarn is 26,000 yuan/ton. It means Chinese cotton textile enterprises will have to endure a loss of 2,000 yuan while producing one ton of cotton yarn, when about 7,000 yuan is added towards cost of labour, energy, transportation, finance and other costs.
 
This huge price difference in Chinese and imported cotton is forcing some textile firms to switch to manufacturing of fabrics from synthetic fibres that are extracted from petroleum and petrochemical products. 
 
The drop in international oil prices in recent time is also helping these textile firms to switch to manufacturing of synthetic fabrics made from nylon and polyester.
 

Fibre2fashion News Desk - China

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