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Fabric weaving factories cut production
02
Jun '10
The spring of 2010, witnessed an amazing scene as orders for yarn were overflowing with spinning mills. Buyers with delivery orders waited patiently with cash in hand to take delivery. Operational rates of spinning mills in that period were above 90 percent.

But the scenario has changed drastically in the last few fortnights. A survey by China Textile Industry Association reveals that since March this year, a number of smaller cotton fabric production companies with low financial capacity are in dire straits.

Many weaving factories have reduced production or have completely stopped their plants as their profit margins have turned negative. The reason being that the hike in yarn prices has not got translated in to a corresponding increase in fabric and clothing prices.

According to statistics data of China Cotton Association, as of April 30, cotton prices had risen 8 percent, cotton yarn 32s rose 12 percent, when compared with prices prevailing before the Spring Festival, while cotton fabric prices only rose 5.7 percent.

When cotton price increases by 30 percent, retail price of clothing should at least rise by about 20 percent for enterprises to digest cost pressure, aver experts, which have not been the case so far, which is leading fabric producers to cut output or close down.

Currently national average price of standard-level cotton is over 17,000 Yuan per ton and the highest it has touched is 17,500 Yuan per ton, a high, seen last in 2004. On an annual comparison basis, cotton prices have increased by 30 percent since December.

Fibre2fashion News Desk - China

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