Textile companies: why the China cotton price doesn’t rise?
Source: cncotton Date: 2006-11-29
If there is no protective policy from the government, how much would the domestic cotton price rise? The benchmark price of 12,950 yuan per ton for imported cotton is a ceiling price of domestic cotton.
According to the manager of a big textile company in Hebei, the sale of its pure cotton yarn is equivalent to that of the last year and the price is stable. But compared to last year, the price of most descriptions decreased 300-400 yuan per ton in general. That manager thought that because the price of lint cotton has decreased in a large scale, so their profit would be as much as that of last year.
Like some of the local textile companies, that company has began to procure seed cotton in succession and the average price of T328 was about 12,500 yuan per ton. Furthermore, this company also imported some Australia cotton ordered in Sep. the average price of which was about 13,400 yuan per ton (settled by net weight, good quality, few harmful fibers and the moisture is between 6 to 7 percent). According to the manager, if be converted to public weight, the actual fee of the lint cotton with the average price of 13,400 yuan per ton would be about 13,000 yuan per ton in terms of cost.
In this aspect, the price advantage of China cotton is obvious and that’s why many textile companies pay attention to the domestic market all along. But the price advantage cannot make the China cotton price rise largely. Now, some of the large textile companies do not begin to extend their cotton inventory and most of them are waiting for the import quota of foreign cotton with the 1% custom duty. The manager said bluntly that, the average price of U.S. cotton procured by local textile companies in Oct. was just 11,000 yuan per ton (equivalent to that of China cotton T328), the custom duty of which was 1 percent. The price difference between that U.S. cotton mentioned above and the China cotton is beyond 1,000 yuan per ton, so before the bottom of this year, the domestic market would be suppressed all along.
The manager also said that, the crazy rebound of ZCE futures is derived from the government policy. The condition of textile industry is not good and the sale of fabric is very poor, so there is little possibility for the rise of the spot price. Even though the price of the spot rises, it is just a flash in the pan.
