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High cotton prices bewilders textile mills

04
Dec '09
Recently, raw materials market of the textile industry is witnessing skyrocketing of prices led by cotton, which has surprised the downstream sector, which has been caught unawares and was totally unprepared for the flare up in prices.

In the face of a still fragile recovery of global economy and slow export prospects, the industry is widely concerned that textile enterprises that are still in weak conditions may stoop or even sink under the pressure of ever-increasing prices.

Traditionally, cotton spinning enterprises stock up their cotton inventories, by taking advantage of low price when new cotton arrives in the market in September, each year, but this year, cotton supply has been short and the high prices have kept these enterprises away.

Cotton price has increased from 13,000 Yuan per ton to a high of 15,700 Yuan per ton, since early September, due to expectations of a decline in cotton production and also a renewed demand for the white gold from textile mills.

As cotton prices keep ascending the graph, companies have changed their strategy and are significantly reducing the amount of their purchase and inventory.

Currently, viscose staple fiber price has maintained steadiness at 18,500 Yuan / ton, viscose filament yarn price remains stable at 34,000 Yuan / ton, while the mainstream price of cotton pulp hovers around 11,600 Yuan per ton.

According to back of the envelope calculations, without taking into account the factor of inventory cycle of raw materials, and based on the current purchase price of cotton linter at 7,000 Yuan / ton, price of cotton pulp inclusive of tax will reach 12,900 Yuan per ton, while that of viscose staple fiber will reach 20,000 Yuan per ton.

Fibre2fashion News Desk - India


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