In the United States, a new series of spinning units closed their doors after cotton prices recently rose above the 80-cent level. Smallest companies are not able bearing this new burden. In the small US town of Bowling Green (North Carolina) for example, the family-owned Bowling Green Spinning Co would soon shut down its plant, a local newspaper reported.
A few days earlier, the Fayette Cotton Mill (Alabama) announced it will shut down as required by its parent group Fruit of the Loom.
Large parts of the US cotton textile industry already disappeared in the past two years, actually, as a result of a substantial rise in Asian imports. With the current surge in raw material costs, other textile companies could be liquidated.
Three months ago, US group Pillowtex announced it would stop all activities, laying off all its 6,450 employees. The number of textile workers in the United States fell from about 600,000 in 1998 down to less than 400,000 in the current period.
Cotton consumption also sharply declined in the past two years, as a consequence.
In other developed countries, the recent surge in cotton prices will also put textile companies into receivership.
In Australia, Rocklea Spinning Mills was not able resisting the increase in domestic cotton prices, added to competition from new spinning mills in Asian low-cost countries. The company was forced going into receivership a few days ago, as a consequence.
Spinners in developing countries are also meeting increasing difficulties in dealing with the rise in their raw material costs.
In Pakistan where cotton prices incredibly surged in the past three weeks, spinners were forced purchasing cotton at very high prices, since their inventories were at a very low level.
In Pakistan like elsewhere, cotton yarn makers did not anticipate the surprising surge in prices. Ahead of a new crop arrival in the Northern Hemisphere, they expected a seasonal decline in prices due to the high level of cotton offered in this part of the year.
With cotton stocks at so low levels, yarn makers often have no choice but to buy cotton at current prices in order to keep running their mills. .
On the other hand, spinners were not always able passing the recent surge in prices on to their customers.
In Bangladesh at the opposite, knitwear producers are apparently paying the price for the surge in international cotton prices. Cotton yarn prices surged in the past weeks, complained the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). Average price of domestic carded yarn (30s) rose 25% in the past fortnight from US$2.50 up to US$3.10, the BKMEA said.
The Bangladeshi textile industry association BTMA replied that prices were still below US$3 per kilo. The rise in cotton yarn prices in Bangladesh is mainly due to the ban of imports through roads, the BKMEA argued. The ban was imposed two years ago in order to limit smuggling and possibly weaken competition from Indian cotton spinning industry. .
The ban would be removed as a result of current free trade negotiations between India and Bangladesh.
World weaving industry will also forced supporting the cotton shock with yarn makers..
In India, Arvind Mills expects a substantial rise in its raw material costs after already facing a slowdown in global denim demand and a rise in the Indian rupee. In Vietnam, local textile industry is also confronted with a surge in costs, as the country still imports about 90% of its annual fiber consumption. Since offering very low prices, Vietnam is more threatened by the current surge in raw material costs than any other Asian nation. In addition to textile producers, woven apparel makers could be forced absorbing the rise in costs in certain countries.
In Pakistan, competitiveness of garment producers would be weakened by the rise in fabric prices, according to the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA). Prices of denim fabrics were already up 16 rupees (29 US cents) per meter, the association said. Buyers in developed countries will not accept any new rise in prices, exporters fear. .
In the United States especially, prices were already stimulated by the recent fall of the US dollar while US consumers are increasingly attracted by lower-priced apparel. .
The global textile and apparel industry could be forced absorbing the cotton shock, as a consequence. .
Source: Sahara Group- R&D Department.
Date:10/29/2003
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