February 21, 2012

China's cotton prices may decline

As the Chinese consumption remains weak, the local cotton prices may face downward pressure, the research centre under China National Cotton Reserves Corp (CNCRC) said Monday (Feb 20).

Ample supply and competitive global prices will also weigh on local prices, said the report published on www.cncotton.com, a website operated by CNCRC.

The government's cotton purchases, which kicked off in September, have helped to support local prices, making import prices more attractive to users.

Demand from the textile industry is weak and may shrink further if cotton prices rise, the report said, adding cotton mills may raise cotton yarn or cotton cloth imports or even use substitutes such as polyester fibre to reduce cotton usage.

China's textile products and clothing export value in 2011 rose 20%, down 4.5 percentage points from that in 2010, it said.

Meanwhile, 52% of local enterprises surveyed were pessimistic about the orders in the first quarter of 2012, showing weak market sentiment, the report said.

Cotton imports are likely to reach 4.22 million tonnes in the 2011/12 crop year which started from September, up 64% from the same period the previous year, it said.

While the crop's output is estimated at 7.55 million tonnes in the current crop year, up 21% on-year, consumption is forecast at 8.7 million tonnes, down 6.0% on-year, it said.

As a result, stocks will be 5.28 million tonnes in 2011/12, more than twice the 2.13 million tonnes in 2010/11, it said.