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From: Emerging Textiles
5 May 2009 -- As cotton prices are rising on the world markets, yarn makers in China, India and Pakistan are confronted with very different market situations. China has a clear advantage in local currency terms but is losing its competitiveness on the international market, according to our statistical analysis in both domestic currency and US$ terms.
After declining to a relatively low level in last fall, cotton prices began recovering in the past months in leading textile producing countries.
The price recovery started in January in China and in India while cotton lint prices really rebounded in April in Pakistan.
The current rise in cotton prices is due to different factors depending on countries.
In China and India, state-controlled agencies purchased large quantities of cotton from the last crop in order to support revenues of domestic farmers.
In Pakistan by contrast, a lack of supply is pushing up prices to higher levels.
Domestic Currency vs. US$ Markets
Compared with the market situation a year ago, cotton prices are still up 6% in Pakistan and in India while they fell 10% in China, in local currency terms.
This is another story in US$ terms. While the renminbi stays pegged to the American dollar, the Pakistani and Indian rupees heavily fell from a year earlier.
As a result, US$ cotton prices more radically declined in India and Pakistan in the last twelve months than in China, as reflected by our second table below.
Compared with Chinese cotton prices, Indian and Pakistani prices are much lower than a year ago, as a result.
Cotton yarn prices followed rather similar trends over the same period.
Chinese Prices Lower in Yuan Terms, Higher in US$ Terms
In domestic currency terms, cotton yarn prices rose 8% in India and 1% in Pakistan while down 4% in China.
In US$ terms however, yarn prices more significantly fell in India and Pakistan than in China.
Demand for Indian and Pakistani yarns is therefore rising on the Far Eastern market, not surprisingly.
The price difference is increasing to the detriment of Chinese yarns, entirely due to sharp variations on the forex market.
When considering the value added by spinners in the three different countries, China is clearly losing ground, reflecting spinners' difficulties in passing on the rise in material costs on to their customers.
Pakistani and Indian yarn makers are less suffering.
As a result, the share of raw material costs in cotton yarn prices is rapidly increasing in China in US$ terms while no more rising in India and Pakistan.
- Send to EmergingTextiles.com
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