By The Spinwell Marketing Team
The first month of 2012 was a wonderful start for the textile and cotton industries of Indonesia. January saw renewed enthusiasm and optimism in the market. In fact, since the first working day of the new year, weΆve seen an impressive number of new inquiries and confirmed purchases.
Things werenΆt so positive for cotton yarn and fiber industries, which continued to see slumping inquiries, with little demand for cotton related products in either local or export markets.
Substitute fibers such as polyester and rayon are taking advantage of the situation, with inquiries pouring in from both export and import markets. The majority of spinning mills in Indonesia have switched at least 40% -- and as much as 80% -- of their cotton production to spin synthetic yarns.
We have come to the conclusion that end-user demand for lower-priced textile product is the main reason behind this trend. Could it be that for many people, comfort is becoming a lower priority?
We tried to conduct our usual half-a-year review of cotton consumption in Indonesia but couldnΆt because the numbers were constantly changing because many mills have adopted a “by order production” strategy. Mills in Indonesia are now only buying fiber when they need it, or at most one month in advance.
The only time when fresh cotton purchases were thriving was the first half of January, a time when cotton from Pakistan and Indian cotton was the lowest around. When their prices rose in mid-January, demand quickly dropped and hasnΆt recovered since.
There have been many inquiries, but spinning mills are balking at the price. We believe that activity in the Indonesian market will resume once physical cotton prices reach 85-90 usc/lb for a Middling 1-3/32 to 1-1/8 grade, and 70-80 usc/lb for open-end-grade cottons.
Another good sign in Indonesia is that many mills that had obligations from high-priced contracts carried forward since 2011 are ready to come back to the table and work things out. Many have found a solution by merging the old, high-price contract with new, discounted purchases.
