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Cotton prices soar to 140 year high on demand from China, India

November 19, 2010

Next summer when u go out to buy yourself a new wardrobe, don’t flinch at the price tag. Prices of clothes are expected to rise drastically as demand for cotton outstrips supplies.

“It’s a little terrifying to deal with cotton suppliers now,” said Vicky Wu, a sales manager at Suzhou Unitedtex Enterprise Ltd., a closely held, Jiangsu province-based clothes maker that counts Gap and J.C. Penney among its clients.

Shandong Zaozhuang Tianlong Knitting Co., which makes Polo Ralph Lauren Corp. T-shirts and track suits for Le Coq Sportif Holding SA, has raised prices as much as 70 percent from a year earlier, said sales manager Fred Hu. “If cotton keeps rising like this, we will need to lift prices by 30 percent by the Spring Festival next year or we lose money.”

Closely held Tianlong ships 80 million yuan of clothes to Europe, North America and Japan annually, and raised the price of T-shirts it sells to Ralph Lauren to US$4 each, from US$3.20 in July, according to Bloomberg.

Unitedtex, which sells US$24 million worth of shirts and jackets annually to Gap, plans to raise prices by 5 percent to 30 percent for products that will be available in April, Wu said in an interview. The supplier plans to increase capacity to meet the retailer’s demand, she told Bloomberg.

Cotton prices have climbed 78 percent this year on concern that shrinking global supplies won’t meet demand in the Asian nation. Production of the fiber in China, the world’s biggest user and importer, is forecast to lag behind demand for a 12th year, cutting its stockpile to the smallest since 1995, according to the U.S. Department of Agriculture. Prices of cotton reached US$1.5195 on Nov. 10, the highest since trading began 140 years ago. Adverse weather damaged crops in China, Pakistan and the U.S. earlier this year.

Upped by massive demand from Chinese manufacturers that supply to large American and European retail chains, China, is expected to buy 20 million bales this year to meet rising demand from domestic textile mills, according to Olam International Ltd.. The amount would be a record. Trying to cope with the massive demand, India’s textiles ministry Oct. 11 halted registration of new export contracts after it got applications to export 5.5 million bales, the maximum permissible this year, in 10 days after bookings began.

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