20 July 2011
Cotton prices dramatically fell in the last weeks in China, India and Pakistan. Spinners did not similarly react to the drop in prices. Profit margins have been more preserved in Pakistan than in China and India, as reflected by our series of historical data, back four years ago.
Cotton fiber and yarn prices continued heavily falling in the first two weeks of July, with even a clear acceleration in the downward trend.
Large yarn inventories are further depressing demand in Asia.
Spinners are forced to reduce their prices in addition, although their stocks were produced with higher-priced cotton.
If cotton prices strongly fell in China and India, they more evidently slided in Pakistan where the new crop began flooding the local markets, as usual in this period of the year.
By contrast, the new cotton season will not begin before September-October in China and October-November in India.
In the first two weeks of July, cotton prices were nearly back to their level a year earlier in Pakistan, while they were still 26% and 23% higher in China and in India, respectively.
Cotton yarn prices are following the same trend, however with strong differences in the three major markets.
Yarn prices dramatically fell in India where spinners are trapped with very large inventories after exports were previously capped for a few months, before being again allowed.
Cotton yarn prices therefore fell below their level a year earlier.
Pakistani spinners were slow in reducing their prices, therefore keeping a larger margin than in China or India.
Compared with a year ago, the yarn/fiber spread fell 39% in China, 34% in India and only 3% in Pakistan.
China continues offering the most reduced margin with raw material costs accounting for 79% of yarn price, compared with 69% in India and 62% in Pakistan.