By Wang Xinyuan
Cotton prices rose to a new historic high recently due to tight supplies and growing demand, putting the textile industry under great cost pressures that may eventually trickle down to consumers.
According to the China Cotton Index Tuesday, the average spot price for grade A cotton was 22,817 yuan ($3,392.86) per ton, up 687 yuan ($102.16) over Sunday's prices.
The future price of cotton for November delivery closed at 23,370 yuan ($3,475.09) per ton Tuesday, up a whopping 34 percent from the previous month, according to the Zhengzhou Commodity Exchange.
Future prices started on a strong upward trend one month ago, said Wang Yong, a cotton industry analyst with Hongyuan Futures.
"We had expected the price rise in view of the tight supply this year, but it has risen so fast within such a short period of time that the price has gone beyond our expectations," Wang told the Global Times.
The price hikes have been fueled by a decrease in production while demand has continued to rise, according to a teleconference held Monday by the National Development and Reform Commission and included six other major regulators including the Ministry of Agriculture and the Ministry of Finance.
Together these government bodies concluded they would work to alleviate industry issues by further ensuring market supply, purchasing cotton from farmers and strengthening regulations to keep speculation in check, the NDRC said on its official website without providing further details.
Ongoing cotton price hikes have already dried up profits at smaller textile firms and forced some to raise prices as well as stockpile the raw material, which has acted to drive prices up further, Wang from Hongyuan Futures said Tuesday.
"We have already seen some price increases in the (garment) industry due to the rising cost of the cloth," Wang Miao, president of the China National Garment Association, told the Global Times.
But with new cotton becoming available in the market in October, prices are expected to retreat a little, Wang said without specifying the exact price level.
Following the August release of 600,000 tons of cotton from the country's reserves in August, policymakers will place an additional 400,000 tons of reserves into the market, according to China Cotton Association