Cotton prices are falling across the board in China where polyester prices are even more rapidly plunging, with polyester fibers being more competitive than a month ago, as a result. In India and Pakistan, prices are staying firm, but they could eventually be affected by the Chinese storm.
Cotton and polyester prices are experiencing a significant decline in China, whereas being much more stable in India and Pakistan.
Resulting from a sharp fall of demand from downward producers in the textile and apparel industries, cotton has lost 540 yuan per metric ton in May, a decline of 3.4% if considering the average price over the month.
The cotton indicator has further fallen in the last days, now reaching 14,092 yuan, down nearly 10% from its level four weeks ago.
This is of course a very significant decline, especially on the Chinese market where cotton officials have kept prices rather unchanged in the past years, trying to find a compromise between farmers and spinners.
Market disruption
The idea was to keep China’s cotton textile industry competitive versus foreign producers whereas supporting cotton production at home to avoid importing too large quantities of cotton fibers.
The management of official stocks was supposed to regulate the prices. The intensity of the current crisis is however disrupting the system.
Sales from state stocks have resumed on May 5th and price offers have heavily fallen, being calculated in taking into account the level of international prices, which have sharply dropped.
In India and Pakistan, cotton prices have moved into different directions.
They have rebounded in India, before slightly returning back to a lower level.
At the end, May averaged level is down 1.5% from April, with benchmark Shankar 6 at 45,322 rupees per candy.
Current price is similar, at 45,700 rupees.
Currency depreciation in Pakistan
In Pakistan, cotton prices are not really moving, being supported by a fall of the domestic rupee.
With spinners currently relying on foreign cotton, the decline of international prices is offset by the depreciation of the domestic currency.
The lack of supply on the domestic market is also supporting prices.
In both countries, cotton production should sharply rebound in the coming season, if the weather or diseases do not disrupt the growing process, as repeatedly experienced in the last years.
Polyester prices have also been very stable in India and Pakistan.
In India, strong demand is supporting prices, as spinners do progressively raise the use of polyester in yarn production.
In Pakistan, the fall of the rupee has supported prices, whatever the decline of Chinese offers.
PSF plunging in China
PSF prices have actually plunged in China. Average price in May at 8,140 yuan was already down 710 yuan per metric ton or 8%, from the level of April.
Prices have now reached 7,190 yuan, losing no less than 14.6% in four weeks.
As a consequence, and whatever the fall of cotton prices, the cotton v. polyester price difference has risen in China.
Polyester is increasingly cheaper, which should support PSF use at spinning mills.
Source: Emergingtextiles
