Textile makers squeezed by cotton crisis

The global textile manufacturing industry cannot absorb the unprecedented price hikes of recent months any longer without putting its own survival in jeopardy, a top expert claims.

The industry is being squeezed by increasing costs triggered by high world cotton prices - which have more than doubled in the last six months - and the low prices received for their products because of continued downward pressure by retailers, said Christian Schindler, Secretary-General of the International Textile Manufacturers Federation (ITMF).

The surge in global cotton prices has been fuelled by a combination of factors including stronger than anticipated demand in major emerging economies such as China and India, and lower than expected cotton crop yields in some countries.

India's decision in April to impose a ban on cotton exports, which also applied to signed contracts, has also played a part. The measure was lifted in May and replaced by the ushering in of stricter export licensing terms and an additional tax of INR 2,500/tonne ($56.45/tonne), according to the World Trade Organization (WTO).

Relative to cotton, synthetic fibres are cheaper despite the high global oil prices. But experts such as Milasoa Cherel-Rodson, a commodity specialist at the UN conference on Trade and Development, point out that cotton is more resilient to price pressures compared to synthetics. When margins are squeezed there is always an opportunity to move to higher-end market niches. However, some experts think the shift to more synthetic share in blends would be short lived.

It's also anticipated that a cotton price correction will redress things at some stage in the future, to reflect increases in cotton production in major producing nations such as Brazil and a slowdown in demand in some major markets such as China.