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Textiles price dip: Clothes to become cheaper?

Wool, cotton, polyester prices are on a downward spiral and Chinese cotton has dropped as much as 40 per cent since January 2014. Also, the dip in price of crude oil and gas has made transportation more economical. Cotton prices started to fall last year due to the abandonment of a disastrous government’s stockpiling policy in China. This year though, prices have been relatively stable supported by the expectations of a lower end of the season stock level. According to forecast, this is expected to dip by 5 per cent year-over-year in the 2015-16 season.

Transportation costs as well as polyester yarn, has been affected because of the recent falls in crude oil and gas prices. Polyester yarn is made out of crude oil derivatives. Prices of polyester reduced considerably due to a sharp drop in the derivative’s cost, in the second half in 2014. Moreover, polyester was under pressure because of the fall in cotton prices as it has to stay cheaper than cotton to remain competitive.

In 2014, Australian wool prices were relatively stable in AUD, but became cheaper in USD terms due to the strong US dollar. Wool prices recovered though, in recent months, because of China’s low stock availability and strong demand.

Thus, since textile prices have fallen through the years, will clothes get cheaper and will these savings get passed along the supply chain? It seems not, for, as per market analysts, the cost of raw material in apparel production consists of only around 10 per cent of the total cost. The cost of production, packaging and shipping into the US does not exceed 30 per cent and the labour cost is merely between 0.5 per cent to 1 per cent.

 
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