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Textile firms can bear higher cotton cost
09
Feb '10
According to a recent survey by the cotton industry, cotton-spinning enterprises have received adequate orders from fourth quarter of 2009 onwards, due to which, they have maintained full operational rates.

If raw cotton accounts for about 60 percent in the costs of cotton yarn, then the cost bearing capacity of cotton price will be as high as 3,000 Yuan / ton. Therefore, textile enterprises can withstand higher cotton price. A rough calculation shows that textile enterprises can bear the highest cotton cost up to 18,000 Yuan per ton.

At present, after the release of 2.6 million tons of state cotton reserves, the State still holds 1.50 million tons of cotton reserves, so the cotton stocks that can be used to control the market are limited. Issuing additional import quota will be a double-edged sword, though it can increase domestic supply, it will also boost international cotton price.

Two months later, when getting into April and May, it will be cotton planting period, generally the State would not release cotton-control policies during the period, while cotton planting area will be the main concern in the market.

In addition, textile enterprises will operate at full capacity and start production of summer orders. Cotton demand will increase and supply will be tight, by then, cotton price will be encouraged to go higher or rebound.

Entering June, pre-purchased cotton imports under quotas issued in earlier time will be gradually shipped into China, cotton demand will get into off-season and cotton price will decline sharply due to some factors, such as news of increase in cotton cultivation areas.

From mid-September to December, weather factors will become the focus of market attention, while foreign orders for Christmas and winter clothing will come in, consumer demand will once again become dominant concern.

But at this time, new cotton and old cotton will be used interchangeably and cotton price may witness a substantial rally, if the arrival of new cotton is not smooth or supply is tight.

Fibre2fashion News Desk - China

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