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Cotton consumption is down worldwide. Due to a lack of demand from manufacturers and under the effect of large stocks, spinning mills are buying less cotton. A lack of prospects which affects the prices of white gold which make the yoyo.
The spinners have lost their appetite and no one knows when they will find him. “The hallali seems close as demand has contracted”, comments a player in the sector.
There was overconsumption of cotton in 2020-2021, even when prices were above 150 cents per pound of cotton, says another expert. Stocks of yarn and fabric have accumulated among manufacturers. And even if the market has come down to more “normal” prices, around 85 cents, demand from spinners has dried up for 5/6 months.
Fall in Chinese yarn imports
If the stocks explain this slowdown, we must add the energy costs which affect the factories, even those which are not in Europe. Inflation and the general context of sobriety also give pride of place to the recycling of cotton products.
The prospects for deconfinement in China are also too meager to fuel the hope of a recovery: from January to September, the Middle Kingdom, according to figures from the American Department of Agriculture, imported half as much yarn of cotton than last year. China has never imported so little in ten years. And when the world’s leading importer of yarn is idling, the spinning mills of India, Vietnam, Pakistan and even Uzbekistan are in turn reducing the pace.
If spinners are buying less, it’s also because central banks are struggling to release dollars. This is particularly true in Pakistan and Bangladesh where foreign exchange is granted in priority for food imports. So many obstacles that cause some traders “an intense fear” of not seeing industrial activity pick up again.
Declining production in several countries
If Australia is announced this year as one of the engines of production, we know that several African countries, but also Brazil and Pakistan will see their harvest drop. The US Department of Agriculture, whose statistics refer, revised world production downwards in its latest report in November. There will be no lack of cotton for this campaign, but the forecasts, weaker than expected, should keep prices in a high range.
A sign of a market that remains difficult to define, however, cotton prices have been yo-yoing for several weeks, making everyone who lives off the white gold trade dizzy.