Decline of Cotton Price Promotes Industrial Growth

Purchase and storage policies are retreating from the arena of history. Progress of marketization is approaching and cotton price decline sharply. However, this also presents a chance for the textile filed. Business performance of many textile enterprises in China rises again while some textile and garments stocks recovering from rebounds.

National purchase and storage work will finish by 31st August. Influenced by futures market, the price of new cotton is estimated to decrease to 1500RMB per tons or even lower. This will benefits production and export of textile industry. And it has been proved to be the case. Many textile and garments stocks rebound decently when the cotton price declining.

Since 19th June, Shenyin Wanguo Textile and Clothing Index has have risen from 1586.65 to 1842.47, with a growth of 16.13%. Among that, Vico Essentials has risen by 80.68%, accumulated rise of Hangmin Stock, Huarun Jinghua and Zhejiang Furun also reached more than 40%. Shares of Xunxing Stock, Zhonghe Stock, Huafang Textile also have risen more than 30%.

Due to decline of stored cotton’s price, and the policy of new direct allowance on cotton which will be carried out in 2015, the domestic textile enterprises spend less in raw materials and profits make some rises.

From the aspect of cotton’s prices at home and abroad, domestic textile enterprises have more competitive advantages than foreign competitors when price of domestic cotton per ton is 3000RMB higher than that of imported cotton (with 1% tariffs ).

According to industrial research, many textile enterprises at present stay at pessimistic states. It is predicted that increasing textile companies will quit production and business, or transfer the factories. This will lead to adverse effect on the change of cotton’s price from 2014 to 2015.