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Chinese cotton market rebound unlikely in near future
May '14
Rebound of the Chinese cotton market seems to be unlikely in the near future, according to industry analysts.
In April 2011, the domestic market price of cotton in China was hovering around 30,000 yuan/ton, whereas the price last month was around 17,500 yuan/ton, i.e. the three-year decline of nearly 42 percent. In fact, cotton prices have fallen sharply by nearly 10 percent in the Chinese domestic market in April this year.
Till the new cotton crop arrives in September, the market supply would be mainly sold through the national reserve, and cotton spot market price is likely to fluctuate around 17,250 yuan/ton, analysts’ estimate.
At present, most downstream spinning enterprises are adopting cautious approach while buying cotton, mainly due to lack of orders and uncertain market outlook. Moreover, funds are generally tight with the enterprises as there is large loan pay back pressure and hence, companies are not willing to tie-up too much capital.
The textile and apparel exports from China grew marginally by 0.4 percent year-on-year to US$ 58.13 billion during the first three months of the current year, which is lower than market expectations. This reflects that China’s export situation is still grim.
Another serious problem is the 12.805 million tons of cotton stocks lying in national reserves, which is more than annual cotton consumption of the Chinese enterprises.
So, in view of the above factors, as the textile industry gradually slides into the off-season, the possibility of rebound of cotton prices is unlikely in near future.

Fibre2fashion News Desk - India

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