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High domestic cotton prices and low polyester prices in China have made its cotton spinning sector less competitive.
“The Cotlook A Index and the price of polyester in China were nearly equal during most of the 2000s, with cotton sometimes cheaper of the two,”
the International Cotton Advisory Committee (ICAC) said in a press release.
According to ICAC, the prices started diverging in 2009/10, and cotton prices have remained substantially above those of polyester since then.
During the build-up of Chinese reserves, domestic cotton prices as per the China Cotton Index were around 144 cents/lb, but quickly fell when the
government announced it would no longer buy cotton.
Domestic prices continued to fall in August 2015, averaging 95 cents/lb and narrowing the gap with international cotton prices.However, polyester
prices have also fallen during the same period,maintaining the spread between cotton and polyester.“The lack of competitive pricing for cotton, coupled
with turmoil in its stock markets, has curtailed growth in China's cotton spinning sector,” ICAC averred.“Consumption is projected to reach around 7.7
million tons, far below the peak of ten million tons in the mid- 2000s,” it informed.
In recent years, mill use has shifted to lower cost countries, primarily in Asia, as cotton spinning has become less competitive in China.ICAC believes
that in2015/16, world consumption growth will likely be limited, because international cotton prices remain higher than competing manmade fibres.
World cotton consumption is forecast to grow by 2 per cent and reach 25 million tons, which remains below the volume consumed just before the
global economic recession.World cotton imports are projected to remain stable in 2015/16 at 7.6 million tons, while China's imports are forecast to
decline 12 per cent to 1.6 million tons from a peak of 5.3 million tons in 2011/12.Imports outside of China would offset China's decline, rising by 3 percent
to 6 million tons with gains in the next three largest importers.
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