It has been noted that in about past six months the demand for cotton in China has dropped continuously, especially due to the sluggish state of textile industry.
Thus, cotton inventories are already huge and traders have been extremely concerned, particularly since the arrival of new cotton.
Considering the above factors, cotton prices have started dipping. While cotton was quoted around 17,600 yuan per ton in March 2008, it is now priced at just 13,600 yuan per ton.
Experts say that when prices of most raw-materials and others items are rising due to international inflation, internal factors like RMB appreciation and almost nil demand are pulling down cotton rates.
One of the factors affecting the prices is that Government announced a subsidy of 400 yuan per ton for Sinkiang-cotton that is transported to other provinces, so as to clear out the inventories.
Another reason for the dramatic fall in prices is that it is time for cotton enterprises to pay back the loan of Agricultural Bank of China. Thus, companies are reducing their prices so as to liquidate their stocks.
American Agriculture Department has estimated that in the second half of this year, the output of Chinese cotton will remain similar to the current 7.729 million tons. However, the cotton consumption will go down by 220,000 tons from present 11.75 million tons.
Fibre2fashion News Desk - China
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