The sharp increase in cotton and cotton yarn prices is likely to have an impact on China's exports of cotton textile goods in 2004. U.S. protectionism and reduced value-added tax returns on exports will probably also affect export business, industry sources say.
According to a spinner in Qingdao, the prices of cotton and cotton yarn climbed 30% in September and October. Particularly, cotton prices rose by 5,000 yuan from the same period of the previous year to 18,000-20,000 yuan/ton, and those of cotton yarn climbed to 21,000-24,000 yuan/ton. "It has become difficult to purchase cotton and cotton yarn, as such circumstances are pressuring our operations," said the spinner.
The sharp increase in material costs is attributed to: (1) Demands for cotton and cotton yarn continued to grow in the downstream sector; (2) Many manufacturers moved to fill their losses caused by the SARS outbreak; (3) A supply shortage occurred as real cotton production was below expectations; and (4) The cotton dealing system has not matured enough for fair business on the market. One analyst advises the government to release cotton stocked in warehouses.
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