The cotton market, which had cooled down after the end of the policy regulation in late 2010, is now showing signs of a renewed upward trend. Recently, domestic cotton prices have risen against the broader market, while international cotton futures have seen three consecutive days of consolidation. Meanwhile, local cotton prices have re-entered a key level of 30,000 yuan per ton. Industry experts predict that the high-price trend for cotton will likely continue after the Spring Festival, and as a result, clothing prices are expected to rise significantly in 2011.
Although cotton prices declined in the second half of 2010 due to government intervention, the pressure on apparel prices has not eased. According to annual reports from listed clothing companies, garment manufacturers have raised their ex-factory prices by between 10% and 20%, driven by rising raw material and labor costs. Even though the price of cotton has fallen from its peak in 2010, the expectation of further increases has already led to higher clothing prices this year.
Market concerns over supply shortages and the recent weakness in the U.S. dollar have also contributed to a rebound in the cotton futures market. While many domestic spinning and weaving companies are preparing for the upcoming Spring Festival holiday with reduced operations, it's unlikely that prices will surge before the holiday. However, the long-term bullish outlook for cotton remains intact. Industry insiders believe that multiple external factors are converging to support the current 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%,†an insider noted. Most 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 importance of increasing the technological value and quality of their products to remain competitive in the long run.
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