Home / Knowledge / News / Textiles / Cotton prices are to remain firm through 2010-11
Cotton prices are to remain firm through 2010-11
17
Dec '10
Fitch Ratings has commented that the continued sharp rise in cotton prices globally is likely to hurt operating margins of Indian textile manufacturers, as prices percolate down the value chain, and are ultimately reflected in high prices of textile and clothing products.

Fitch believes that cotton prices are expected to remain firm in the current cotton season of October 2010 to September 2011, well above the previous season, due to the huge international demand-supply gap, and untimely rains in major cotton producing states in India. The picture should be clearer after anticipated arrivals into the domestic market over December 2010-January 2011, the peak period for such arrivals.

The global demand-supply imbalance is driven mainly by China's increasing domestic cotton consumption, flood-led weak harvests in China and Pakistan, and with India capping its cotton exports to a maximum 5.5m bales to be shipped by mid-December 2010 in order to make cotton available domestically. However, the capping has not helped the domestic textile sector much in the backdrop of soaring international cotton prices, which has encouraged speculation by traders and creation of artificial scarcity in the domestic market. The Indian government is expected to take a call shortly on allowing further exports of cotton.

Cotton prices have risen unusually since August 2010, and as at end-November 2010, prices were hovering at INR108-INR118 per kg (up 60%-70% yoy) across common varieties of cotton. To soften cotton and cotton yarn prices, and ensure adequate availability of yarn in the domestic market, the Union Government has capped cotton yarn exports for the current cotton year to a maximum of 720 million kilogram (kg) to be shipped by mid-January 2011. This initiative is intended to aid the garment industry by reducing input prices. However, yarn spinners will suffer as their selling prices are likely to fall. Yarn exporters also fear losing export customers to their global counterparts.

While cotton prices have increased 30%-35% across common varieties over August 2010-October 2010, yarn prices have increased in the same period by only 15%-20%; this indicates a partial pass-on of price hikes, although the input price hikes may be passed on fully with some time lag. Fabric prices have also gone up, although end-product prices have not increased in tandem. Should cotton prices continue to remain firm, garmenters are likely to also hike end-product prices. However, in the already committed fixed-price contracts, garment exporters might have to suffer on account of rising input prices as well as the appreciating Rupee.

In light of the sharp rise of cotton prices, smaller cotton spinning mills face the threat of shutting-down if they are unable to buy and stock cotton in the ongoing cotton-buying period of October 2010-February 2011). Also, Fitch expects profitability pressure across the value chain given the trickle-down effect of mounting input prices. However this could be mitigated by a diversification into synthetic and other natural fibres.


Must ReadView All

Apparel/Garments | On 23rd Sep 2017

AAFA urges negotiators to preserve TPLs in NAFTA

The American Apparel & Footwear Association (AAFA), an alliance of...

Textiles | On 23rd Sep 2017

SIMA urges Centre to re-look duty drawback rates

he Southern India Mills’ Association (SIMA) has appealed to the...

Textiles | On 23rd Sep 2017

PKR 690.65-mn budget for Pakistan Cotton Committee

The Pakistan Central Cotton Committee (PCCC) recently approved a PKR...

Interviews View All

Top executives
Textile industry, India

Such fairs are a must for industry to showcase new innovations

Jim Desai
Blaiva Fabricaa

Fashion industry likely to remain labour-intensive in coming years

Awen Delaval
Samatoa

'Natural fibres are appreciated for traditional authenticity'

Silke Brand-Kirsch
Schlegel und Partner

Silke Brand-Kirsch, executive partner of Schlegel und Partner, a leading...

Giorgio Mantovani
Corman S.p.A

Giorgio Mantovani, MD of Corman, with a presence in both Milano and New...

Kai Poehler
Voith Paper GmbH & Co. KG

The glass mat industry is growing by five to eight per cent annually. Kai...

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Judy Frater
Somaiya Kala Vidya

Among the many honours showered on Frater, including Fulbright and Ford...

Akta Adani
India Boulevard

India Boulevard is a San Francisco-based curated fashion marketplace that...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

September 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Active Poll

Do you see sustainability as a route to business growth?

Yes
74.5%
No
12.8%
Skip
12.8%

Total Votes: 47

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
61.7%
No
25.5%
Skip
12.8%

Total Votes: 47

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Active Poll

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes
87.2%
No
6.4%
Skip
6.4%

Total Votes: 47

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

Active Poll

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes
70.2%
No
10.6%
Skip
19.1%

Total Votes: 47


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search