Prices soar as China corners cotton

By Staff -- Home Textiles Today, 9/15/2003 12:00:00 AM

WASHINGTON —

After jumping up by more than a third last year, to 56 cents a pound, cotton prices are forecast to rise again next year, though at a much slower pace, edging up an estimated 5.3 percent to 60 cents a pound, the International Cotton Advisory Council (ICAC) reported.

In a monthly update of the world cotton outlook, the international trade group said prices should then level off at about 59 cents a pound for the 2004/05 cotton year as production begins to outstrip demand.

Higher prices, said the cotton cartel, have led to an increase in worldwide production, from 19.2 million last year to an estimated 20.5 million tons this year, a gain of almost seven percent. But consumption — mill use — is forecast to grow at a much slower pace of just 1.0 percent, to 21.2 million tons from 21.0 million last year, helping to put a cap on cotton prices next year.

"World cotton consumption in 2003/04 will be negatively affected by relatively slow world economic growth and by higher cotton prices." Given that pressure, the cotton consortium forecast that "cotton's share of world fiber use is expected to decline to an all-time low of 39.3 percent in 2003, compared to 39.7 percent in 2002."

China continues to be a major cotton consumer and producer of cotton textiles, said the ICAC. "Total yarn output in China reached 8.9 million tons in 2002/03, up 1.4 million tons, or 19 percent, from the previous season." Cotton cloth production in China "increased by 9 percent, while exports were up 34 percent on the season," said the ICAC.

Growth in the Chinese industry is expected to abate as the Chinese government cuts the average export tax rebate to 11 percent from 15 percent. The U.S. is also considering imposing temporary quotas on imports of some textiles and apparel products from China.

China is still expected to use roughly a third of the entire world's cotton supply, about 31 percent, said the ICAC. And China is clearly taking it out of the hide of U.S. manufacturers, with U.S. mill use expected to decline by more than nine percent — to 1.45 million tons from 1.60 million tons a year ago, said the ICAC.

WORLD COTTON SUPPLY AND PRICING FORECAST
(in millions of tons, except for cotton prices)