China's textile firms stockpiling may further push up cotton prices
Source: iStockAnalyst Date: 2010-03-18
BEIJING, Mar. 16, 2010 (Xinhua News Agency) -- Cotton futures prices in China have been rising steadily with recovering demand from the textile industry. Textile firms are also increasing their cotton stockpiles due to worries over a further rise in prices.
Cotton contracts traded on the China National Cotton Exchange surged 80 to 180 yuan/metric ton (tonne) on Monday, with order amount up 36.6 million tonnes. The positions of two-month contracts kept decreasing while the four-month contracts increased their positions sharply and the transaction volume soared 43.6 million tonnes from the previous day.
Meanwhile, cotton companies continue to raise purchase prices of ginned cotton, and yarn is selling well at increasing prices.
According to www.cottonchina.org, domestic commercial cotton stocks stood at 1.13 million tonnes in February, up 145,600 tonnes year on year. However, the daily consumption significantly warmed up, and registered a new high in the crop year 2009 to 2010. The proportion of cotton stocks imported rose from 18.39 percent in September to 20.98 percent because of a supply shortage on the domestic market.
A futures analyst noted that the rise of cotton stocks was attributed to textile firms' stockpiling since the beginning of this year, which also helped to push up cotton prices.
China's cotton price index, the CC Index 328, jumped by 18.4 percent from 12,977 yuan/tonne on September 1, 2009 to 15,361 yuan/tonne on March 12, 2010.
Data from cncotton.com shows that by March 5, purchase prices of unginned cotton averaged at 7.26 yuan/kg, up 1.5 yuan/kg from September of last year. Meanwhile, cotton futures prices soared 31 percent from 13,000 yuan/tonne at the beginning of September to the current level of around 17,000 yuan/tonne.
However, the domestic cotton supply is still tight and imports continue expanding. From September 2009 to January 2010, the country imported a total of 851,598 tonnes of cotton, up 55.5 percent from a year ago.
Cotton imports in December of last year reached 216,715 tonnes, a new monthly high since September of 2008. In January of this year, the imports refreshed that record to hit 301,339 tonnes, with the average price quoted at 1,699 US dollars/tonne, surging 468 US dollars/tonne from May of last year.
Industry insiders say that cotton prices will be supported by fundamental factors in the short term and may rise higher. However, in the long run, prices are likely to correct with the government's regulation.
