The cotton market, which had cooled down after the end of policy regulations at the end of 2010, is now showing signs of a renewed rally. Recently, domestic cotton prices have moved against the broader trend, with international cotton futures stabilizing after three consecutive days of decline. Meanwhile, the domestic cotton price has re-entered a key level around 30,000 yuan per ton. Industry experts predict that the high-price trend for cotton will likely continue post-February's Spring Festival holiday. As a result, clothing prices are expected to rise significantly in 2011.
Although cotton prices declined steadily during the second half of 2010 due to government intervention, the pressure on apparel manufacturers hasn't eased. According to annual reports from listed textile and clothing companies, many have raised their factory prices by between 10% and 20% to offset rising costs of raw materials and labor. Even though the current cotton price has dropped from its 2010 peak, expectations of further increases are keeping clothing prices on an upward trajectory this year.
Market concerns over supply constraints and the recent weakness in the U.S. dollar have also contributed to a rebound in the cotton futures market. Although many domestic spinning and weaving companies are beginning to reduce operations ahead of the Spring Festival holiday, a prolonged price surge before the holiday is unlikely. However, the long-term bullish outlook for cotton remains intact. Industry insiders say that multiple external factors are aligning to reinforce the upward movement in cotton prices, making it a widely accepted trend.
“Cotton prices during the fall and winter of 2010 were generally up by more than 10%,†said an industry insider. Most well-established brands have managed to absorb the cost pressures through price hikes and new product strategies. However, if price adjustments fail to keep pace with rising costs, textile and garment companies may be forced to accelerate their industrial upgrades. The volatility in cotton prices has made many small and medium-sized textile firms realize the need to enhance the technological value and quality of their products in order to remain competitive in the long run.
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