Following a reduction in the price of polyester and an increase in the prices of cotton in China, cotton spinning has become less competitive. This is so because China is the world leading consumer of cotton.
Meanwhile, the price of polyester and the Cotlook A index have remained equal during most parts of the 2000s.Thus; cotton has at times remained a cheaper option.
From 2009 -2010, the price of cotton has remained above that of polyester.
As calculated by the China Cotton Index, the prices of the domestic cotton went down by the time of constructing the official reserves. This was after the government said it would discontinue buying cotton from its stockpile. At that time, the china cotton index stood at 144cents/lb. This notwithstanding, the domestic prices have plummeted and by august 2015, they averaged at 95 cents /lb. It implies that the gap has been narrowed compared to the prices at the international level. Note that polyester prices have continued to fall over the same period and have helped to maintain the spread between cotton and polyester.
The turmoil in the stock markets coupled with diminishing prices of cotton has curtailed the growth of china’s cotton spinning industry.
So far, the projections for consumptions stand at around 7.7 million tons which is definitely below the peak of ten million mark achieved in 2000s. Also, the mill use has shifted to countries whose production cost is low especially the Asian countries because cotton spinning has become less competitive in China. It is estimated that by 2015-2016, the consumption of the product across the globe will grow at a slower pace because the international cotton prices have remained higher compared to the price of the manmade fibers.
Further, it is expected that the consumption of cotton, will grow by 2 % and attain the level of 25million tons in the world. This implies that the volume consumed will remain below that attained prior to the global economic recession. Other than China, Pakistan and India remain the largest consumers of cotton. The three countries account for 64 percent of the cotton consumed in the world.
Note that the reduced growth in demand is unlikely to affect the worlds ever reducing stock that is expected to reduce by 6% or slightly more than 1 million tons to about 20.4 million tons.