Credit crunch may negatively affect on cotton prices
11 Aug '07
3 min read
At this time of the year the market is primarily focused on the more volatile supply side of the equation, as traders are trying to establish how big crops may turn out to be, while demand typically does not get as much attention since it is expected to move higher in linear fashion.
But the above described events have the potential to lead to some unforeseen downward adjustments in demand if consumers are forced to retrench. Even before these problems in the financial markets started to surface, demand has turned rather sluggish in recent weeks after a flurry of activity in May and June.
There are stories of mills in the China curtailing production or shifting to polyester due to high cotton prices. Over the last four weeks, prices for PSF (Polyester Staple Fibers) have indeed risen substantially in China, apparently in reaction to some mills replacing expensive cotton with polyester.
Today's US export sales report confirmed that business is rather slow at the moment, as there were only 135'400 running bales of Upland and Pima cotton sold last week. At least shipments continued to be strong at over 405'000 bales.
marketing@alchempro.com
