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China loses cotton advantage

High domestic cotton prices and low polyester prices in China have made its cotton spinning sector less competitive. Prices started diverging in 2009-10 and cotton prices have remained substantially above those of polyester since then. Lack of competitive pricing for cotton, coupled with turmoil in its stock markets, has curtailed growth in China’s cotton spinning sector. Consumption is projected to reach around 7.7 million tons, far below the peak of 10 million tons in the mid- 2000s.

In recent years, mill use has shifted to lower cost countries, primarily in Asia, as cotton spinning has become less competitive in China. In 2015-16, world consumption growth will likely be limited, because international cotton prices remain higher than prices of competing manmade fibers.

World cotton consumption is forecast to grow by two per cent and reach 25 million tons, which remains below the volume consumed just before the global economic recession. In addition to China, India and Pakistan are the largest consumers of cotton and these three countries alone account for 64 per cent of world cotton consumption.

Consumption in India and Pakistan is anticipated to increase by three per cent. However, world cotton area is projected to be down seven per cent in 2015-16 to be just under 31 million hectares due to significantly lower prices in 2014-15.

 
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