| A shortfall in domestic output and India's export ban | | | | Brazil, West and Central Africa, and Central Asia. |
| are curtailing China's fiber stockpile, resulting in higher | | | | If there is still a shortage despite these alternative |
| fabric and finished product prices, and reduced profit | | | | sources, yarn can be procured instead. |
| for suppliers. | | | | Escalating future, spot prices |
| China's apparel, textiles and related industries are | | | | India implemented its export ban on cotton on April |
| bracing for yet another difficult year. Exports may be | | | | 19. The next day, the New York Board of Trade |
| on the rebound, but an imminent shortage in local and | | | | cotton futures rose by about 4 percent. July cotton |
| overseas cotton supply is threatening to curb growth. | | | | futures closed at 84.60 cents per pound, while those |
| Lackluster demand forced a reduction in cotton | | | | for May ended at 82.85. |
| acreage in 2009. The Cotton Research Institute of | | | | In the same day, the Cotlook Indices, a major |
| the Chinese Academy of Agricultural Sciences | | | | parameter for international cotton spot prices, also |
| Institute estimates total planted area in the | | | | increased. The Cotlook Far East A Index increased |
| September 2009 to August 2010 period will go down | | | | 115 points, settling at 87.30 cents per pound. |
| 3.5 percent to 4.5 to 4.8 million hectares. | | | | Even local spot prices climbed up. Four days after the |
| With the global economy picking up, demand for the | | | | ban was implemented, domestic grade 328 cotton |
| natural fiber began increasing as well. China, however, | | | | reached 16,354 yuan ($2,392) per ton, up 0.34 |
| was not the only cotton producer that slashed | | | | percent from the previous week. |
| output in the 2008/2009. Nearly all major sources of | | | | On May 19, November futures advanced 1.12 percent |
| the fiber, including the US, planted fewer seeds to | | | | and closed at 17,030 yuan ($2,494) per ton. This also |
| cut down on costs or as a result of unfavorable | | | | represents a 7 percent jump over a two-week |
| weather conditions, pulling down global cotton | | | | period. |
| inventory. | | | | More expensive fabrics, finished goods |
| Although China tried to boost output this year, bad | | | | The upward trend in cotton spot and future prices |
| weather is preventing farmers from augmenting the | | | | has a substantial impact on China's manufacturers of |
| low stockpile. Harvest is estimated to be delayed by | | | | apparel, textiles and related products. |
| 10 to 15 days. | | | | Compared with late last year, quotes for different |
| The National Bureau of Statistics revealed the | | | | kinds of denim and cotton gray fabrics that Shenzhen |
| country's cotton output for 2009/2010 will reach 6.4 | | | | Huacun Textile Co. Ltd sources are now about 10 |
| million tons, down by 1 million tons from the previous | | | | percent higher. The company manufactures men's, |
| year. | | | | women's and children's apparel. |
| The United States Department of Agriculture, | | | | Cotton fabrics purchased by bedding supplier Qingdao |
| meanwhile, pegs current global inventory at only 1.1 | | | | Riches Imp. & Exp. Co. Ltd are 15 percent more |
| million tons. Although this is the lowest it has been | | | | expensive than what they were six months ago. |
| over the past seven years, output for 2010/2011 is | | | | Hangzhou Xiaoshan Huafeng Feather & Down |
| projected to be even less than that. | | | | Products Co. Ltd raised bedding prices 10 percent |
| Andrew Dong, general manager assistant and director | | | | because the fabrics it procures from Shandong |
| of the research institute at Jinshi Futures Co. Ltd, said | | | | province now cost 25 percent more than they did |
| the country's consumption for this year would be | | | | less than six months ago. |
| about 10.5 million tons, 39 percent higher than current | | | | Adjusting prices upward, however, is not always a |
| supply. The deficit is usually imported, primarily from | | | | viable option for suppliers. Shenzhen Huacun said |
| the US and India. For 2008/2009, China procured | | | | some buyers will not accept higher quotes especially |
| 630,000 tons from the US and 320,000 tons from | | | | for repeat orders. |
| India, accounting for 41 and 21 percent of its total | | | | Home textiles, yarns, fabrics and apparel maker |
| cotton imports. | | | | Ningbo Veken Elite Group Co. Ltd works with its |
| In December, China's National Development and | | | | buyers to reach an acceptable compromise on |
| Reform Committee released a cotton import quota | | | | materials and prices. |
| of 1.89 million tons. The NDRC set out an additional | | | | Most manufacturers also negotiate with their |
| quota of 800,000 tons this month, bringing the total | | | | long-term fabric suppliers to lower costs. Others take |
| allowable imports for 2009/2010 to approximately 2.7 | | | | an indirect approach to reducing expenses by |
| million tons. | | | | commissioning their skilled workers to train new hires |
| But India stopped export registration for raw cotton | | | | to boost efficiency and minimize fabric wastage. |
| last month. Even registered cotton that had yet to | | | | ODM-oriented companies such as apparel company |
| be shipped out was affected by the overseas sales | | | | Guangzhou Textiles Holdings Ltd, however, are in a |
| ban. This restriction was lifted only on May 23, but a | | | | better position to deal with higher cotton costs. As |
| license has to be obtained before the fiber can be | | | | they come up with their own designs, renderings can |
| exported. | | | | be improved or tweaked for optimum fabric |
| For these reasons, Dong estimates China would | | | | consumption. |
| probably have a cotton shortage by Q3 2010. | | | | But for businesses that cannot enforce any of these |
| Although the deficit will last for two months, at most, | | | | options, they have no choice but to absorb all |
| costs are expected to continue rising throughout the | | | | additional costs and accept thinner margins. |
| period. | | | | |
| The information department director of the China | | | | This article was originally published by Global Sources, |
| Cotton Association, Ma Aifang has a more optimistic | | | | a leading business-to-business media company and a |
| view about the cotton supply. Ma believes the | | | | primary facilitator of trade with China manufacturers |
| country would not have a shortage this year. If the | | | | and India suppliers, providing essential sourcing |
| volume from India and the US is insufficient, China | | | | information to volume buyers through our |
| could still import from other sources such Australia, | | | | e-magazines, trade shows and industry research. |