Cotton price hike likely to adversely affect textile sector

07 Nov '06

2 min read

According to the relevant statistics, China produced 9.83 million tons of yarn in 2003, up 16 percent on a year basis. In 2004 China's yarn production increased to 11.20 million tons, 14 percent above the previous year.

Having entered into this cotton season (Sept 2004-Aug 2005), the textile industry continues its fast growth.

In Sept 2004 - Feb 2005, the country's yarn production increased 22 percent from the same period of the previous year, according to the state statistics. Based on last year's yarn production growth of 14 percent, the cotton demand in 2004 would be over 8 million tons.

Taking into consideration of the factors such as the increased proportion of cotton consumption by the elimination of global textile quota and the rise in oil price, the cotton demand is likely to expand further.

Cotton supply is expected to be even intense in these two years by judging the situation over the decreasing world and domestic cotton planting areas and the increasing cotton consumption.

To promote the cotton production this year, the government has recently raised the state cotton procuring-price to 12000 yuan per ton.

The figure indicates that domestic cotton mills would bear an extra production cost of about 4 billion yuan, if cotton price increases 500 yuan per ton. The big rise in price would possibly leave the lower chain factories hard to shift the extra cost to other sections.

Industrial experts point out that when the raw material cost account for over 70 percent of manufactured textile products, the change in raw material would have direct impact over the industrial situation.

It's still too early to predict how big the impact of cotton price rise is on apparel industry by now, the situation should be clearer in about two months, though cotton price has kept going up for some time already.

Fibre2fashion, News Desk - China

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