Export Prices Steady Despite Rising Cotton Costs

Spot and futures quotes for cotton growing in recent weeks. However, keen competition and poor market EU keep increasing prices of finished products at bay.

cotton prices have been rising over the past few weeks. While China's suppliers of fabric and yarn to adapt quickly read, manufacturers of downstream products such as garments, bags and home textiles are under great pressure to keep prices steady.

Compared with three months ago, cotton costs, especially for textiles, rose between 3 and 5 percent in August. Yarn spinner Nanjing Jiefeng Textile Co. Ltd has been adapted to read the face and futures prices in the domestic market. Fabric mills have done the same. This is normally three to four months for such cost increases to reflect the cost of finished products. This year, however, stiff competition and increased price sensitivity among foreign buyers, will make it difficult for exporters to pass on additional costs to their customers.

Furthermore, the demand decreases and its suppliers do not want to aggravate the situation by raising prices. Due to the debt crisis, EU customers are placing smaller orders or even abolishing completely. Apparel maker Shenzhen Danyal Apparel Co. Ltd exports to Germany and Italy have fallen about 20 percent over the past six months.

Ningbo Veken Elite Group Co. Ltd believes that its shipment of clothing and textiles in the EU will fall 50 percent in the next half godine.Tvrtka is now banking on domestic sales, which will help strengthen its earnings for the year.

Accordingly, the company implemented various measures to manage costs better. This includes the strategic positioning of samples and cutting the pieces carefully to maximize the bolt of fabric. Guangzhou Textiles Holdings Ltd has stopped using expensive fabrics in clothing design.

Spot, futures markets

China's strong demand for fibers, and state intervention in a local cotton prices to rise. With the harvest season should start in late September, Beijing is likely to take measures in order to read high so that farmers can sell their cotton at a good price.

U 10 August, 328 local grade spot cotton prices to 18 142 yuan ($ 2.660) per tonne, which is 11 percent of 23 April quotes.

But the central government is also taking steps to minimize the difference between demand and production and keep prices from rising too fast. One of these is to approve the additional import quotas for this year. In addition to 1.89 million tons granted previously, the National Development and Reform Committee allowed an additional 800,000 tonnes to be purchased in May and 910 000 tonnes in June. In addition, Beijing released 600,000 tons of cotton reserves in June. Yarn makers began to supply the stored fibers on August 10

China Cotton Association are hoping these measures will be sufficient to meet demand from textile manufacturers and stabilize quotes.

the cost of cotton on the international scene to cool in August, as a result of multiple events.

In July, the Indian government lifted its ban on exports of cotton, which was effective from April. In the same month, Pakistan removed its 15 percent export tariff on cotton yarn. In addition, a report published 30th June from the United States Department of Agriculture showed 2010/2011 planted area for cotton is now expected to reach 10.9 million hectares, or 3.9 percent from March estimates.

Concerns that the EU will slip into a double-dip recession have dampened demand, as well, leading to lower prices in the futures market.

NYBOT price for October and December cotton contract 84.38, and 81.13 cents per pound, respectively, on the 10th August By contrast, May and July futures reported on 20 April are 82.85 and 84.60 cents per pound. China's strong growth in production in August, a depreciating dollar, however, pulled the quotes. From 2 September, October and December contract settled at 90.87 and 89.49 cents per pound.