Soaring international cotton prices in upstream raw materials sector is an important reason for rising prices across the entire textile industry chain this year. Global cotton prices have been on the rise since the end of last year.
The surge in prices of cotton has been rapidly transmitted to the yarn fabric and apparel processing sector and consumers as well. The average price of standard cotton grew from 12,831 Yuan / ton in 2009 to 18,165 Yuan / ton in July of this year.
The ferocious rally of international and domestic cotton and other raw materials, coupled with the pressure of RMB appreciation have diluted again and again, business profits of the domestic textile and apparel sector.
The pressure of slow RMB appreciation has never weakened, textile and garment enterprises in Guangdong are mainly SMEs, who work on very low margins and are very sensitive to appreciation of the Renminbi.
If the Renminbi restarts appreciation, their profit margins will be totally wiped out and may also go in to negative territory, which could have serious repercussions on the apparel sector as a whole, more so if they are not able to pass on increased costs to the buyers.
Fibre2fashion News Desk - China
marketing@alchempro.com
